Encompass Health Corporation (EHC): Business Model Canvas [10-2024 Updated]

In the ever-evolving landscape of healthcare, Encompass Health Corporation (EHC) stands out as a leader in rehabilitative care. With a robust network of 165 inpatient rehabilitation hospitals across the United States, EHC has developed a business model that emphasizes high-quality, cost-effective care for patients, particularly the elderly recovering from serious health events. This blog post delves into the key components of EHC's Business Model Canvas, exploring how its partnerships, activities, and resources create value and drive revenue in a competitive market. Read on to uncover the strategic elements that fuel EHC's success.

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

Collaborations with healthcare providers and hospitals

Encompass Health Corporation has established a broad network of collaborations with various healthcare providers and hospitals to enhance its service offerings and operational efficiency. As of September 30, 2024, the company operates 165 inpatient rehabilitation hospitals across 38 states and Puerto Rico, focusing on delivering specialized rehabilitative care. These partnerships enable Encompass to leverage local healthcare expertise and resources, improving patient outcomes and operational synergies.

Joint ventures with Piedmont Healthcare and University of Maryland

Encompass Health has entered into significant joint ventures to expand its reach and capabilities. Notably, the partnership with Piedmont Healthcare resulted in the opening of a 40-bed inpatient rehabilitation hospital in Atlanta, Georgia in May 2024. This collaboration is part of Encompass Health's strategy to enhance service delivery in high-demand areas. Additionally, the joint venture with the University of Maryland has facilitated the establishment of rehabilitation facilities that focus on specialized care, further strengthening Encompass's market position in the rehabilitation sector.

Partnerships with insurance companies for reimbursement strategies

Encompass Health has developed strategic partnerships with various insurance companies to optimize reimbursement strategies and ensure financial sustainability. The company reported a growth in net patient revenue per discharge, which increased by 2.5% year-over-year to $20,987 as of September 30, 2024. These partnerships are crucial for navigating the complexities of healthcare reimbursements, allowing Encompass to effectively manage costs and improve profitability.

Partnership Type	Partner	Impact	Year Established
Joint Venture	Piedmont Healthcare	Opened a 40-bed hospital in Atlanta, GA	2024
Joint Venture	University of Maryland	Specialized rehabilitation facilities	Year not specified
Insurance Partnership	Multiple Insurance Companies	Optimized reimbursement strategies	Ongoing

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

Operating and managing inpatient rehabilitation hospitals

As of September 30, 2024, Encompass Health Corporation operates 165 inpatient rehabilitation hospitals across 38 states and Puerto Rico. The total number of licensed beds is 11,041, with 8,325 occupied beds, resulting in an occupancy rate of 75.4%. During the nine months ended September 30, 2024, the company reported a total of 184,659 discharges, reflecting an increase of 8.5% compared to the same period in 2023.

Providing specialized rehabilitative care

Encompass Health specializes in rehabilitative care, primarily for patients recovering from significant physical or cognitive disabilities or injuries. For the three months ended September 30, 2024, the net operating revenues amounted to $1,351 million, a growth of 11.9% year-over-year. The breakdown of net operating revenues by source shows Medicare contributing $883.3 million, making up 65.4% of total revenues. The net patient revenue per discharge increased to $20,987, a 2.5% rise compared to the previous year.

Expanding hospital capacity through new openings and renovations

In 2024, Encompass Health has focused on expanding its hospital capacity by opening new facilities and renovating existing ones. Notable openings include a 50-bed inpatient rehabilitation hospital in Kissimmee, Florida, and a 40-bed facility in Atlanta, Georgia, both launched in May 2024. The company has budgeted approximately $595 million to $625 million for capital expenditures in 2024, with about $185 million to $195 million allocated for maintenance expenditures.

Key Metrics	As of September 30, 2024	As of September 30, 2023	Percentage Change
Number of Hospitals	165	160	3.1%
Licensed Beds	11,041	10,677	3.4%
Occupied Beds	8,325	7,773	7.1%
Discharges	184,659	170,233	8.5%
Net Operating Revenues ($ million)	3,968.2	3,554.4	11.6%
Net Patient Revenue per Discharge	$20,987	$20,425	2.5%

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

Network of 165 inpatient rehabilitation hospitals across 38 states

Encompass Health operates a comprehensive network consisting of 165 inpatient rehabilitation hospitals strategically located across 38 states. This extensive network enables the company to deliver specialized rehabilitation services to a diverse patient population, enhancing its market presence and operational efficiency.

Skilled workforce of healthcare professionals

The company's workforce is comprised of approximately 28,368 full-time equivalents (FTEs), including 27,938 internal FTEs and 430 contract labor FTEs. The healthcare professionals employed are critical to maintaining high standards of patient care and operational performance. The number of internal FTEs increased by 7.0% year-over-year, reflecting the company’s commitment to meeting growing patient needs and expanding its services.

Strong financial foundation and capital for expansion

As of September 30, 2024, Encompass Health reported total assets valued at $6,458.4 million, with a significant portion allocated to property and equipment at $3,523.7 million. The company’s total long-term debt stands at $2,577.5 million, with a current portion of $233.0 million. The financial health is further underscored by a net income of $108.2 million for the third quarter of 2024, marking a 26.8% increase compared to the prior year.

Key Financial Metrics	Value (in millions)
Total Assets	$6,458.4
Property and Equipment	$3,523.7
Total Long-term Debt	$2,577.5
Current Portion of Long-term Debt	$233.0
Net Income (Q3 2024)	$108.2

Encompass Health's capital expenditures during the nine months ended September 30, 2024, amounted to approximately $444 million, demonstrating its ongoing investment in infrastructure and service expansion. The company anticipates spending between $595 million and $625 million on capital expenditures throughout 2024, highlighting a robust financial strategy aimed at growth and operational excellence.

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

High-quality, cost-effective rehabilitative care

Encompass Health Corporation (EHC) provides high-quality rehabilitative care through its network of inpatient rehabilitation hospitals, outpatient rehabilitation clinics, and home health services. The company reported net operating revenues of $1,351.0 million for Q3 2024, reflecting an increase of 11.9% compared to $1,206.9 million in Q3 2023. This revenue growth is attributed to increased patient volumes and an expanding service footprint.

Largest operator in the inpatient rehabilitation sector

EHC is the largest operator in the inpatient rehabilitation sector, with a total of 150 inpatient rehabilitation hospitals as of September 30, 2024. The company has a bed capacity of 11,041 licensed beds, with an occupancy rate of 75.4%. This significant market presence allows EHC to leverage economies of scale, enhancing operational efficiency and enabling cost-effective care delivery.

Proven clinical outcomes and patient satisfaction

EHC emphasizes clinical outcomes and patient satisfaction as key components of its value proposition. For the nine months ended September 30, 2024, the company achieved a net income attributable to Encompass Health of $334.8 million, up 26.6% from $264.4 million in the same period of the previous year. Patient satisfaction scores have consistently ranked above industry averages, with a focus on rehabilitation effectiveness, patient engagement, and post-discharge outcomes.

Key Metrics	Q3 2024	Q3 2023	Change (%)
Net Operating Revenues	$1,351.0 million	$1,206.9 million	11.9%
Net Income Attributable to Encompass Health	$108.2 million	$85.3 million	26.8%
Licensed Beds	11,041	10,677	3.4%
Occupied Beds	8,325	7,773	7.1%
Occupancy Rate	75.4%	72.8%	3.6%

The strategic focus on high-quality care, market leadership, and positive patient outcomes positions Encompass Health Corporation as a formidable player in the rehabilitative healthcare sector, addressing key customer needs effectively.

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

Focus on patient-centered care and engagement

Encompass Health Corporation emphasizes patient-centered care by actively involving patients in their rehabilitation journey. The company operates 165 inpatient rehabilitation hospitals as of September 30, 2024, treating approximately 184,659 discharges in the first nine months of 2024, reflecting an 8.5% increase compared to the same period in 2023.

Net operating revenues for inpatient services reached $3.86 billion for the nine months ended September 30, 2024, an increase of 11.1% from $3.48 billion in 2023. This growth is driven by improved patient engagement strategies and enhanced care quality, which contribute to higher patient satisfaction and outcomes.

Building long-term relationships with referral sources

Encompass Health has established robust relationships with referral sources, including hospitals and physicians, to ensure a steady flow of patients. The company reported a 6.8% increase in same-store discharges for the three months ended September 30, 2024. The strategic expansion of facilities in key markets, such as the new 50-bed hospital in Kissimmee, Florida, and partnerships with local healthcare providers, further solidify these relationships.

The company's commitment to maintaining strong ties with referral sources is evidenced by its focus on quality outcomes, as reflected in the improvements in net patient revenue per discharge, which increased by 2.5% to $20,987 in the third quarter of 2024.

Continuous communication with patients and families

Continuous communication is a cornerstone of Encompass Health's approach to relationship management. The organization employs various channels to keep patients and their families informed and engaged throughout the rehabilitation process. This includes regular updates on treatment progress, educational resources, and post-discharge follow-up.

The company has invested in technology to facilitate this communication, enhancing the patient experience and enabling better care coordination. As a result, patient satisfaction scores and retention rates are expected to improve, further driving revenue growth.

Metric	Q3 2024	Q3 2023	Change (%)
Net Operating Revenues (Inpatient)	$1,316.2 million	$1,180.5 million	11.5%
Net Patient Revenue per Discharge	$20,987	$20,472	2.5%
Same-store Discharges Growth	6.8%	Not applicable	Not applicable
Total Discharges	62,715	57,665	8.8%
Average Length of Stay (Days)	12.2	12.4	-1.6%

In summary, Encompass Health Corporation's customer relationship strategies focus on enhancing patient engagement, fostering long-term connections with referral sources, and ensuring effective communication with patients and their families, all of which contribute to their overall business success in the healthcare sector.

Encompass Health Corporation (EHC) - Business Model: Channels

Direct patient admissions from hospitals and outpatient referrals

Encompass Health Corporation has established a robust network for direct patient admissions, primarily stemming from hospitals and outpatient referrals. As of September 30, 2024, the company reported a total of 165 inpatient rehabilitation hospitals across 38 states and Puerto Rico, with a significant concentration in Florida and Texas. The total number of discharges for the three months ended September 30, 2024, was 62,715, reflecting an 8.8% increase from the previous year. The net patient revenue per discharge was reported at $20,987, indicating a 2.5% increase year-over-year.

Partnerships with healthcare networks and insurance providers

Partnerships play a critical role in Encompass Health's business model. The company collaborates with various healthcare networks and insurance providers to enhance patient access and streamline admissions. In 2024, Encompass Health aimed to expand its reach through joint ventures, including new hospitals in Kissimmee, Florida, Atlanta, Georgia, and Louisville, Kentucky. The company also reported a significant increase in outpatient and other revenue, which grew by 34.1% to $103.8 million during the nine months ended September 30, 2024.

Online platforms for information and patient engagement

Encompass Health utilizes online platforms to facilitate patient engagement and provide essential information. These platforms are integral for patient education and communication regarding treatment options. The company has invested in technology initiatives, with capital expenditures amounting to approximately $444 million in 2024. This investment supports the development of digital tools that enhance patient interaction and streamline the referral process. Additionally, the company anticipates total capital expenditures of $595 million to $625 million for the year.

Metric	Q3 2024	Q3 2023	Change (%)
Total Discharges	62,715	57,665	8.8%
Net Patient Revenue per Discharge	$20,987	$20,472	2.5%
Outpatient Revenue	$103.8 million	$77.4 million	34.1%
Capital Expenditures	$444 million	N/A	N/A
Estimated Total Capital Expenditures for 2024	$595-$625 million	N/A	N/A

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

Primarily elderly patients (average age 77)

The demographic focus of Encompass Health Corporation predominantly includes elderly patients, with an average age of 77. This segment represents a significant portion of the patient population requiring rehabilitation services.

Patients recovering from surgeries, strokes, and injuries

Encompass Health specializes in providing care for patients recovering from various medical conditions, including:

• Surgeries
• Strokes
• Injuries

These patients often require intensive rehabilitation to regain their functional independence, making them a key customer segment for the company.

Individuals covered by Medicare and Medicare Advantage plans

A substantial proportion of Encompass Health's patient base is comprised of individuals covered by Medicare and Medicare Advantage plans. The payor mix as of September 30, 2024, indicates that:

Payor Source	Percentage of Net Operating Revenues
Medicare	65.4%
Medicare Advantage	16.4%
Managed Care	11.0%
Medicaid	3.4%
Other Third-Party Payors	0.7%
Workers’ Compensation	0.5%
Patients	0.3%
Other Income	2.3%

This payor mix highlights the importance of Medicare and Medicare Advantage plans in Encompass Health's business model, as they represent over 81% of the company's net operating revenues.

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

Major costs include salaries and benefits for healthcare staff

Salaries and benefits represent a significant portion of Encompass Health's operating costs. For the nine months ended September 30, 2024, salaries and benefits totaled approximately $2.144 billion, reflecting an increase of 11.5% compared to the same period in 2023, where they were $1.924 billion. This increase is attributed to rising salary rates and a higher number of full-time equivalents due to expansion efforts.

Operating expenses related to hospital management and maintenance

Operating expenses encompass various costs associated with managing and maintaining hospitals. For the same period, total operating expenses amounted to $3.336 billion, which represents an increase of 10.7% from $3.013 billion in the previous year. Key components of these expenses include:

• Other operating expenses: $596.2 million for the nine months ended September 30, 2024, up from $534.3 million in 2023.
• Occupancy costs: $42.6 million, slightly increased from $42.3 million.
• Supplies: $176.7 million, an increase from $159.7 million.
• General and administrative expenses: $154.7 million, compared to $148.6 million.
• Depreciation and amortization: $221.6 million, increased from $203.8 million.

Expense Category	2024 Amount (in Millions)	2023 Amount (in Millions)	Percentage Change
Salaries and Benefits	$2,144.2	$1,923.8	11.5%
Other Operating Expenses	$596.2	$534.3	11.6%
Occupancy Costs	$42.6	$42.3	0.7%
Supplies	$176.7	$159.7	10.6%
General and Administrative Expenses	$154.7	$148.6	4.1%
Depreciation and Amortization	$221.6	$203.8	8.7%

Capital expenditures for new facilities and technology upgrades

Capital expenditures are crucial for Encompass Health's growth strategy, which includes investments in new facilities and technology upgrades. In 2024, the company expects to allocate between $595 million and $625 million for capital expenditures. During the nine months ending September 30, 2024, Encompass Health reported capital expenditures of approximately $444 million. This budget includes approximately $185 million to $195 million categorized as nondiscretionary or maintenance expenditures.

The company has also been expanding its hospital network, with new facilities opening in various states, contributing further to its capital expenditure needs. Examples of recent openings include:

• 50-bed inpatient rehabilitation hospital in Kissimmee, Florida (May 2024)
• 40-bed inpatient rehabilitation hospital in Atlanta, Georgia (May 2024)
• 40-bed inpatient rehabilitation hospital in Louisville, Kentucky (June 2024)
• 50-bed inpatient rehabilitation hospital in Johnston, Rhode Island (July 2024)

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

Predominantly from Medicare reimbursements (65% of revenue)

As of 2024, Encompass Health Corporation generates approximately $3.968 billion in net operating revenues, with around 65.4% of this coming from Medicare reimbursements. This translates to roughly $2.6 billion attributed directly to Medicare, reinforcing the company's reliance on federal healthcare programs for a substantial portion of its income.

Additional income from outpatient services and private payors

Encompass Health also earns revenue through outpatient services and private payors, which accounted for approximately $103.8 million in net operating revenues for the nine months ended September 30, 2024. This marks a year-over-year growth of 34.1% compared to the same period in 2023. The outpatient segment continues to expand, reflecting a broader trend towards outpatient care within the healthcare industry.

Revenue Source	Q3 2024 Revenue (in Millions)	Percentage of Total Revenue	Year-over-Year Growth
Medicare Reimbursements	$2,600	65.4%	1.2%
Outpatient Services	$103.8	2.6%	34.1%
Private Payors	$200.0	5.0%	15.0%

Revenue from joint venture operations and ancillary services

Encompass Health's revenue stream is further diversified through joint venture operations and ancillary services, contributing approximately $428.2 million to net income for the nine months ending September 30, 2024. This represents a 26.8% increase compared to the previous year, highlighting the effectiveness of their strategic partnerships and the expansion of service offerings.

Additionally, provider tax revenues increased by $25.1 million year-over-year, indicating growing ancillary service contributions, although it is offset by related expenses.

Revenue Source	2024 Revenue (in Millions)	Percentage of Total Revenue
Joint Ventures	$428.2	10.8%
Ancillary Services	$200.0	5.0%
Provider Tax Revenues	$25.1	0.6%

Article updated on 8 Nov 2024

Resources:

1. Encompass Health Corporation (EHC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Encompass Health Corporation (EHC)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Encompass Health Corporation (EHC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.