8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): February 26, 2018

Encompass Health Corporation

(Exact name of Registrant as specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

001-10315	63-0860407
(Commission File Number)	(IRS Employer Identification No.)

3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243

(Address of Principal Executive Offices, Including Zip Code)

(205) 967-7116

(Registrant’s Telephone Number, Including Area Code)

HealthSouth Corporation

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.     Emerging growth company   o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

The information contained herein is being furnished pursuant to Item 2.02 of Form 8‑K, “Results of Operations and Financial Condition,” and Item 7.01 of Form 8-K, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 2.02. Results of Operations and Financial Condition.

On February 26, 2018, Encompass Health Corporation (“Encompass Health” or the “Company”) issued a press release reporting the financial results of the Company for the three months and year ended December 31, 2017. A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.

The Company uses “same-store” comparisons to explain the changes in certain performance metrics and line items within its financial statements. Same-store comparisons are calculated based on hospitals open throughout both the full current and prior periods presented. These comparisons include the financial results of market consolidation transactions in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company's results of operations.

ITEM 7.01. Regulation FD Disclosure.

See Item 2.02, “Results of Operations and Financial Condition,” above.

In addition, a copy of the supplemental information which will be discussed during the Company’s earnings call at 9:00 a.m. Eastern Time on Tuesday,February 27, 2018 is attached to this report as Exhibit 99.2 and incorporated herein by reference.

On December 31, 2014, we acquired 83.3% of our home health and hospice business when we purchased EHHI Holdings, Inc. (“EHHI”). In the acquisition, we acquired all of the issued and outstanding equity interests of EHHI, other than equity interests contributed to Encompass Health Home Health Holdings, Inc. (“Holdings”), a subsidiary of Encompass Health and an indirect parent of EHHI, by certain sellers in exchange for shares of common stock of Holdings. Those sellers were members of EHHI management, and they contributed a portion of their shares of common stock of EHHI, valued at approximately $64 million on the acquisition date, in exchange for approximately 16.7% of the outstanding shares of common stock of Holdings. At any time after December 31, 2017, each management investor has the right (but not the obligation) to have his or her shares of Holdings stock repurchased by Encompass Health for a cash purchase price per share equal to the fair value. Specifically, up to one-third of each management investor’s shares of Holdings stock may be sold prior to December 31, 2018; two-thirds of the shares may be sold prior to December 31, 2019; and all of the shares may be sold thereafter. At any time after December 31, 2019, Encompass Health will have the right (but not the obligation) to repurchase all or any portion of the shares of Holdings stock owned by each management investor for a cash purchase price per share equal to the fair value. As of December 31, 2017, the value of those outstanding shares of Holdings was approximately $192 million. In February 2018, each management investor exercised the right to sell one-third of his or her shares of Holdings stock to Encompass Health, representing in the aggregate approximately 5.6% of the outstanding shares of the common stock of Holdings. On February 21, 2018, Encompass Health settled the acquisition of those shares upon payment of approximately $65 million in cash.

This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Note Regarding Presentation of Non-GAAP Financial Measures

The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow.

The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”). The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to prior periods given that it excludes the impact of government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be non-indicative of its ongoing operating performance. It is reasonable to expect that one or more of these excluded items will

occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company’s ongoing operating performance. Accordingly, they can complicate comparisons of the Company’s results of operations across periods and comparisons of the Company’s results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States (“GAAP”) as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies. The Company reconciles adjusted earnings per share to earnings per share in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.

The leverage ratio referenced therein is defined as the ratio of consolidated total debt to Adjusted EBITDA for the trailing four quarters. The Company believes its leverage ratio and Adjusted EBITDA are measures of its ability to service its debt and its ability to make capital expenditures. Additionally, the leverage ratio is a standard measurement used by investors to gauge the creditworthiness of an institution. The Company’s credit agreement also includes a maximum leverage ratio financial covenant which allows the Company to deduct up to $100 million of cash on hand from consolidated total debt. The Company reconciles Adjusted EBITDA to net income and to net cash provided by operating activities in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. Adjusted EBITDA for the Company’s reportable segments is reconciled to net income from continuing operations before income tax expense in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.

The Company uses Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants contained within the Company’s credit agreement, which is discussed in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” and Note 9, Long-term Debt, to the consolidated financial statements included in its Annual Report on Form 10‑K for the year ended December 31, 2017 (the “2017 Form 10‑K”), when filed. These covenants are material terms of the credit agreement. Noncompliance with these financial covenants under the credit agreement—its interest coverage ratio and its leverage ratio—could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might be on terms less favorable to those in the Company’s existing credit agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying common stock dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the Company’s assessment of its liquidity.

In general terms, the credit agreement definition of Adjusted EBITDA, therein referred to as “Adjusted Consolidated EBITDA,” allows the Company to add back to consolidated net income interest expense, income taxes, and depreciation and amortization and then add back to consolidated net income (1) all unusual or nonrecurring items reducing consolidated net income (of which only up to $10 million in a year may be cash expenditures), (2) any losses from discontinued operations and closed locations, (3) costs and expenses, including legal fees and expert witness fees, incurred with respect to litigation associated with stockholder derivative litigation, (4) share-based compensation expense, and (5) cost and expenses in connection with the Encompass Health rebranding. The Company also subtracts from consolidated net income all unusual or nonrecurring items to the extent they increase consolidated net income.

The calculation of Adjusted EBITDA under the credit agreement does not require us to deduct net income attributable to noncontrolling interests or gains on disposal of assets and development activities. It also does not allow us to add back professional fees unrelated to the stockholder derivative litigation, losses on disposal of assets, unusual or nonrecurring cash expenditures in excess of $10 million, and charges resulting from debt transactions and development activities. These items and amounts, in addition to the items falling within the credit agreement’s “unusual or nonrecurring” classification, may occur in future periods, but can vary significantly from period to period and may not directly relate to our ongoing operating performance. Accordingly, these items may not be indicative of our ongoing operating performance, so the Adjusted EBITDA calculation presented here includes adjustments for them.

Adjusted EBITDA is not a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financing activities. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2017 Form 10-K.

The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Management believes the presentation of adjusted free cash flow provides investors an efficient means by which they can evaluate the Company’s capacity to reduce debt, pursue development activities, and return capital to its common stockholders. The calculation of adjusted free cash flow and a reconciliation of net cash provided by operating activities to adjusted free cash flow are included in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities. The Company’s definition of adjusted free cash flow is limited and does not represent residual cash flows available for discretionary spending. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. See the consolidated statements of cash flows included in the 2017 Form 10‑K, when filed, and in the press release attached as Exhibit 99.1 for the GAAP measures of cash flows from operating, investing, and financing activities.

Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of items that are deemed to be non-indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional fees-accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be non-indicative of its ongoing operating performance. These items are uncertain and will depend on several factors, including industry and market conditions, and could be material to the Company's results computed in accordance with GAAP.

Forward-Looking Statements

The information contained in the press release and supplemental information includes certain estimates, projections, and other forward-looking statements that involve known and unknown risks and relate to, among other things, future events, the Company’s business strategy, financial plans, dividend strategies or payments, effective income tax rates, plans to repurchase its debt or equity securities, future financial performance, projected business results or model, ability to return value to its shareholders, projected capital expenditures, leverage ratio, acquisition opportunities, and the impact of future legislation or regulation. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These estimates, projections, and other forward-looking statements are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.

There can be no assurance that any estimates, projections, or forward-looking statements will be realized.

All such estimates, projections, and forward-looking statements speak only as of the date hereof. The Company undertakes no duty to publicly update or revise that information.

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking statements in this report, the press release, and supplemental information as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in the attached press release and in the 2017 Form 10‑K, when filed, and in other documents the Company previously filed with the SEC, many of which are beyond the Company’s control. These factors may cause actual results to differ materially from the views, beliefs, and estimates expressed herein.

ITEM 9.01. Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit Number	Description
99.1	Press release of Encompass Health Corporation, dated February 26, 2018.
99.2	Supplemental information provided in connection with the fourth quarter 2017 earnings call of Encompass Health Corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

ENCOMPASS HEALTH CORPORATION
By:	/S/   DOUGLAS E. COLTHARP
	Name:	Douglas E. Coltharp
	Title:	Executive Vice President and Chief Financial Officer

Dated: February 26, 2018

EX-99.1

Exhibit 99.1

Media Contact	February 26, 2018
Casey Lassiter, 205 447-6410
casey.lassiter@encompasshealth.com
Investor Relations Contact
Crissy Carlisle, 205 970-5860
crissy.carlisle@encompasshealth.com

Encompass Health reports results for fourth quarter 2017

and reiterates full-year 2018 guidance

BIRMINGHAM, Ala. - Encompass Health Corporation (NYSE: EHC), a national leader in post-acute care, offering facility-based and home-based patient care through its network of inpatient rehabilitation hospitals, home health agencies and hospice agencies, today reported its results of operations for the fourth quarter ended December 31, 2017.

“The fourth quarter was a solid conclusion to 2017 and provides further evidence of the underlying strength of our operations and the positive impact of our strategic initiatives,” said Mark Tarr, President and Chief Executive Officer of Encompass Health. “We started 2018 under a new name and brand that reflects our Company's strong business proposition and sustainable business fundamentals. Encompass Health is poised for continued success with strong operating and financial platforms and substantial free cash flow to deploy towards value creating growth opportunities.”

Consolidated results

					Growth
	Q4 2017		Q4 2016		Dollars			Percent
	(In Millions, Except per Share Data)
Net operating revenues	$	1,019.7	$	949.9	$	69.8		7.3	%
Income from continuing operations attributable to Encompass Health per diluted share	0.61		0.68		(0.07		)	(10.3	)%
Adjusted earnings per share	0.70		0.72		(0.02		)	(2.8	)%
Cash flows provided by operating activities	151.4		135.0		16.4			12.1	%
Adjusted EBITDA	208.2		198.8		9.4			4.7	%
Adjusted free cash flow	91.5		80.0		11.5			14.4	%
	Year Ended December 31,
	2017		2016
Cash flows provided by operating activities	657.2		634.4		22.8			3.6	%
Adjusted free cash flow	467.6		474.5		(6.9		)	(1.5	)%

Revenue growth was driven by volume growth in both of the Company's operating segments.

The decrease in income from continuing operations attributable to Encompass Health per diluted share and adjusted earnings per share resulted from an increase in the effective income tax rate. Income from

1

Exhibit 99.1

continuing operations attributable to Encompass Health per diluted share includes the application of the lower income tax rate to the Company’s net deferred tax assets as a result of the Tax Cuts and Jobs Act.

Revenue growth was the primary driver of the increase in cash flows provided by operating activities and Adjusted EBITDA for both the fourth quarter and full-year 2017.

Adjusted free cash flow increased in the fourth quarter of 2017 compared to the fourth quarter of 2016 primarily due to increased Adjusted EBITDA and favorable working capital changes.

Adjusted free cash flow for full-year 2017 decreased compared to full-year 2016 primarily due to increased cash payments for taxes (due to exhaustion of the Company's federal net operating loss in the first quarter of 2017) and increased maintenance capital expenditures in 2017.

See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.

“Adjusted free cash flow for 2017 exceeded our expectations and resulted from strong operating performance and the favorable impact on net working capital attributable to the decline in pre-payment claims denials,” said Doug Coltharp, Executive Vice President and Chief Financial Officer of Encompass Health.

Inpatient rehabilitation segment results

					Growth
	Q4 2017		Q4 2016		Dollars			Percent
Net operating revenues:	(In Millions)
Inpatient	$	784.7	$	740.9	$	43.8		5.9	%
Outpatient and other	26.1		26.7		(0.6		)	(2.2	)%
Total segment revenue	$	810.8	$	767.6	$	43.2		5.6	%
	(Actual Amounts)
Discharges	43,910		41,474		2,436			5.9	%
Same-store discharge growth								3.9	%
Net patient revenue per discharge	$	17,871	$	17,864	$	7		—	%
	(In Millions)
Adjusted EBITDA	$	207.1	$	197.6	$	9.5		4.8	%

• Revenue - Revenue growth resulted from strong volume growth. Holiday-related timing differences favorably impacted discharge growth and negatively impacted revenue per discharge. Discharge growth in the fourth quarter of 2017 was 5.9% compared to 1.4% discharge growth in the fourth quarter of 2016. Same-store discharge growth was 3.9% in the fourth quarter of 2017 compared to 0.1% in the fourth quarter of 2016. Discharge growth from new stores resulted from the Company's joint ventures in Gulfport, Mississippi (April 2017), Westerville, Ohio (April 2017), and Jackson, Tennessee (July 2017), as well as the opening of wholly owned hospitals in Modesto, California (October 2016) and Pearland, Texas (October 2017).

Outpatient and other revenue decreased in the fourth quarter of 2017 notwithstanding $1.9 million in provider tax recoveries.

• Adjusted EBITDA - The increase in Adjusted EBITDA for the inpatient rehabilitation segment resulted primarily from revenue growth. Lower group medical expenses also contributed to growth in Adjusted EBITDA. The year-over-year decline in group medical expenses favorably impacted salaries and benefits as a percent of net operating revenues and served to offset the impact of compensation increases and the ramping up of new stores on this ratio. Other operating expenses increased as a percent of net operating revenues primarily due to increased provider tax expense in the fourth quarter of 2017 and the impact of favorable franchise tax recoveries in the fourth quarter of 2016. Bad debt expense as a percent of net operating revenues decreased from 1.7% in the fourth

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quarter of 2016 to 1.0% in the fourth quarter of 2017 due primarily to a reduction in new pre-payment claims denials.

Home health and hospice segment results

					Growth
	Q4 2017		Q4 2016		Dollars			Percent
Net operating revenues:	(In Millions)
Home health	$	187.3	$	165.2	$	22.1		13.4	%
Hospice and other	21.6		17.1		4.5			26.3	%
Total segment revenue	$	208.9	$	182.3	$	26.6		14.6	%
	(Actual Amounts)
Admissions	31,766		27,957		3,809			13.6	%
Same-store admissions growth								10.1	%
Episodes	56,625		49,253		7,372			15.0	%
Same-store episode growth								11.2	%
Revenue per episode	$	2,989	$	3,023	$	(34	)	(1.1	)%
	(In Millions)
Adjusted EBITDA	$	34.4	$	28.0	$	6.4		22.9	%

• Revenue - Revenue growth was driven by strong volume growth. The decrease in revenue per episode resulted from Medicare reimbursement rate cuts partially offset by changes in patient mix and reconciliation payments attributed to various alternative payment models (e.g., BPCI; ACOs).

The increase in hospice and other revenue primarily resulted from acquisitions completed in 2016.

• Adjusted EBITDA - Growth in Adjusted EBITDA primarily resulted from revenue growth and staffing productivity gains.

Corporate general and administrative expenses

	Q4 2017		% of Consolidated Revenue	Q4 2016		% of Consolidated Revenue
	(In Millions)
General and administrative expenses, excluding stock-based compensation	$	33.3	3.3%	$	26.8	2.8%

General and administrative expenses increased as a percent of consolidated revenue primarily due to a year-over-year increase in incentive compensation, as well as expenses associated with the Company's rebranding and name change and TeamWorks clinical collaboration initiative. During the fourth quarter of 2017, the Company invested $2.5 million in its rebranding and name change and $0.4 million in its TeamWorks clinical collaboration initiative, all of which was included in general and administrative expenses.

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Full-year consolidated results

	Full-Year				Growth
	2017		2016		Dollars		Percent
	(in millions, except per share data)
Net operating revenues	$	3,971.4	$	3,707.2	$	264.2	7.1	%
Income from continuing operations attributable to Encompass Health per diluted share	2.69		2.59		0.10		3.9	%
Adjusted earnings per share	2.76		2.67		0.09		3.4	%
Adjusted EBITDA	823.1		793.6		29.5		3.7	%

See the attached supplemental information for additional details regarding these calculations.

2018 guidance

In a current report on Form 8-K dated January 8, 2018, the Company provided its preliminary guidance ranges for 2018. The Company is confirming the following guidance ranges.

Full-year 2018 guidance ranges
(in millions, except per share data)
Net operating revenues	$4,150 to $4,250
Adjusted EBITDA	$830 to $850
Adjusted earnings per share from continuing operations attributable to Encompass Health	$3.25 to $3.40

For additional considerations regarding the Company's 2018 guidance ranges, see the supplemental information posted on the Company's website at http://investor.encompasshealth.com. See also the “Other Information” section below for an explanation of why the Company does not provide guidance for comparable GAAP measures for Adjusted EBITDA and adjusted earnings per share.

Earnings conference call and webcast

The Company will host an investor conference call at 9:00 a.m. Eastern Time on Tuesday,February 27, 2018 to discuss its results for the fourth quarter of 2017. For reference during the call, the Company will post certain supplemental information at http://investor.encompasshealth.com.

The conference call may be accessed by dialing 877 587-6761 and giving the pass code 2399996. International callers should dial 706 679-1635 and give the same pass code. Please call approximately ten minutes before the start of the call to ensure you are connected.The conference call will also be webcast live and will be available for on-line replay at http://investor.encompasshealth.com by clicking on an available link.

About Encompass Health

As a national leader in post-acute care, Encompass Health (NYSE: EHC) offers both facility-based and home-based patient care through its network of inpatient rehabilitation hospitals, home health agencies and hospice agencies. With a national footprint that spans 127 hospitals and 237 home health & hospice locations in 36 states and Puerto Rico, the Company is committed to delivering high-quality, cost-effective care across the post-acute continuum. Driven by a set of shared values, Encompass Health is the result of the union between HealthSouth Corporation and Encompass Home Health & Hospice, and is ranked as one of Fortune's 100 Best Companies to Work For, as well as Modern Healthcare's Best Places to Work. For more information, visit encompasshealth.com, or follow us on Twitter and Facebook.

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Other information

The information in this press release is summarized and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”), when filed, as well as the Company's Current Report on Form 8-K filed on February 26, 2018 (the “Q4 Earnings Form 8-K”), to which this press release is attached as Exhibit 99.1. In addition, the Company will post supplemental information today on its website at http://investor.encompasshealth.com for reference during its February 27, 2018 earnings call.

The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are included below or in the Q4 Earnings Form 8-K. Readers are encouraged to review the “Note Regarding Presentation of Non-GAAP Financial Measures” included in the Q4 Earnings Form 8-K which provides further explanation and disclosure regarding the Company’s use of these non-GAAP financial measures.

Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of items that are deemed to be outside the control of the Company or otherwise non-indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be non-indicative of its ongoing operations. These items cannot be reasonably predicted and will depend on several factors, including industry and market conditions, and could be material to the Company's results computed in accordance with GAAP.

However, the following reasonably estimable GAAP measures for 2018 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures could be reasonably predicted:

• Provision for doubtful accounts - estimate of 1.6% to 1.9% of net operating revenues

• Interest expense and amortization of debt discounts and fees - estimate of $147 million to $157 million

• Amortization of debt-related items - approximately $7 million

The Q4 Earnings Form 8-K and, when filed, the 2017 Form 10-K can be found on the Company's website at

http://investor.encompasshealth.com and the SEC's website at www.sec.gov.

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Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2017			2016			2017			2016
	(In Millions)
Net operating revenues	$	1,019.7		$	949.9		$	3,971.4		$	3,707.2
Less: Provision for doubtful accounts	(9.7		)	(14.5		)	(52.4		)	(61.2		)
Net operating revenues less provision for doubtful accounts	1,010.0			935.4			3,919.0			3,646.0
Operating expenses:
Salaries and benefits	554.6			516.3			2,154.6			1,985.9
Other operating expenses	139.5			125.1			536.7			492.1
Occupancy costs	18.7			17.8			73.5			71.3
Supplies	38.7			35.8			149.3			140.0
General and administrative expenses	43.1			36.8			171.7			133.4
Depreciation and amortization	46.6			43.8			183.8			172.6
Professional fees—accounting, tax, and legal	—			—			—			1.9
Total operating expenses	841.2			775.6			3,269.6			2,997.2
Loss on early extinguishment of debt	—			—			10.7			7.4
Interest expense and amortization of debt discounts and fees	35.9			41.6			154.4			172.1
Other income	(1.2		)	(0.8		)	(4.1		)	(2.9		)
Equity in net income of nonconsolidated affiliates	(1.8		)	(2.5		)	(8.0		)	(9.8		)
Income from continuing operations before income tax expense	135.9			121.5			496.4			482.0
Provision for income tax expense	49.2			39.7			160.6			163.9
Income from continuing operations	86.7			81.8			335.8			318.1
(Loss) income from discontinued operations, net of tax	(0.2		)	0.3			(0.4		)	—
Net income	86.5			82.1			335.4			318.1
Less: Net income attributable to noncontrolling interests	(25.9		)	(16.8		)	(79.1		)	(70.5		)
Net income attributable to Encompass Health	60.6			65.3			256.3			247.6

(Continued) 6

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Operations (Continued)

(Unaudited)

	For the Three Months Ended December 31,					For the Year Ended December 31,
	2017			2016		2017			2016
	(In Millions, Except Per Share Data)
Weighted average common shares outstanding:
Basic	97.6			88.6		93.7			89.1
Diluted	99.2			99.2		99.3			99.5
Earnings per common share:
Basic earnings per share attributable to Encompass Health common shareholders:
Continuing operations	$	0.62		$	0.73	$	2.73		$	2.77
Discontinued operations	—			—		—			—
Net income	$	0.62		$	0.73	$	2.73		$	2.77
Diluted earnings per share attributable to Encompass Health common shareholders:
Continuing operations	$	0.61		$	0.68	$	2.69		$	2.59
Discontinued operations	—			—		—			—
Net income	$	0.61		$	0.68	$	2.69		$	2.59
Cash dividends per common share	$	0.25		$	0.24	$	0.98		$	0.94
Amounts attributable to Encompass Health common shareholders:
Income from continuing operations	$	60.8		$	65.0	$	256.7		$	247.6
(Loss) income from discontinued operations, net of tax	(0.2		)	0.3		(0.4		)	—
Net income attributable to Encompass Health	$	60.6		$	65.3	$	256.3		$	247.6

7

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	December 31, 2017		December 31, 2016
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	54.4	$	40.5
Restricted cash	62.4		60.9
Accounts receivable, net of allowance for doubtful accounts of $60.9 in 2017; $53.9 in 2016	472.1		443.8
Prepaid expenses and other current assets	113.3		109.3
Total current assets	702.2		654.5
Property and equipment, net	1,517.1		1,391.8
Goodwill	1,972.6		1,927.2
Intangible assets, net	403.1		411.3
Deferred income tax assets	63.6		75.8
Other long-term assets	235.1		221.3
Total assets	$	4,893.7	$	4,681.9
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	32.3	$	37.1
Accounts payable	78.4		68.3
Accrued payroll	172.1		147.3
Accrued interest payable	24.7		25.8
Other current liabilities	210.0		197.1
Total current liabilities	517.5		475.6
Long-term debt, net of current portion	2,545.4		2,979.3
Self-insured risks	110.1		110.4
Other long-term liabilities	75.2		49.6
	3,248.2		3,614.9
Commitments and contingencies
Redeemable noncontrolling interests	220.9		138.3
Shareholders’ equity:
Encompass Health shareholders’ equity	1,181.7		735.9
Noncontrolling interests	242.9		192.8
Total shareholders’ equity	1,424.6		928.7
Total liabilities and shareholders’ equity	$	4,893.7	$	4,681.9

8

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Year Ended December 31,
	2017			2016
	(In Millions)
Cash flows from operating activities:
Net income	$	335.4		$	318.1
Loss from discontinued operations, net of tax	0.4			—
Adjustments to reconcile net income to net cash provided by operating activities—
Provision for doubtful accounts	52.4			61.2
Depreciation and amortization	183.8			172.6
Amortization of debt-related items	8.7			13.8
Loss on early extinguishment of debt	10.7			7.4
Equity in net income of nonconsolidated affiliates	(8.0		)	(9.8		)
Distributions from nonconsolidated affiliates	8.6			8.5
Stock-based compensation	47.7			27.4
Deferred tax expense	75.6			132.9
Other, net	3.4			0.1
Change in assets and liabilities, net of acquisitions—
Accounts receivable	(83.9		)	(127.5		)
Prepaid expenses and other assets	(12.6		)	(3.3		)
Accounts payable	7.5			6.3
Accrued payroll	24.4			21.4
Other liabilities	3.7			11.8
Premium paid on redemption of bonds	—			(5.8		)
Net cash used in operating activities of discontinued operations	(0.6		)	(0.7		)
Total adjustments	321.4			316.3
Net cash provided by operating activities	657.2			634.4

(Continued) 9

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	For the Year Ended December 31,
	2017			2016
	(In Millions)
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired	(38.8		)	(48.1		)
Purchases of property and equipment	(225.8		)	(177.7		)
Additions to capitalized software costs	(19.2		)	(25.2		)
Proceeds from disposal of assets	12.3			23.9
Purchase of restricted investments	(8.5		)	(1.3		)
Net change in restricted cash	(1.5		)	(15.1		)
Other, net	(3.0		)	(1.6		)
Net cash provided by investing activities of discontinued operations	—			0.1
Net cash used in investing activities	(284.5		)	(245.0		)
Cash flows from financing activities:
Principal payments on debt, including pre-payments	(129.9		)	(202.1		)
Borrowings on revolving credit facility	273.3			335.0
Payments on revolving credit facility	(330.3		)	(313.0		)
Principal payments under capital lease obligations	(15.3		)	(13.3		)
Debt amendment and issuance costs	(3.1		)	—
Repurchases of common stock, including fees and expenses	(38.1		)	(65.6		)
Dividends paid on common stock	(91.5		)	(83.8		)
Proceeds from exercising stock warrants	26.6			—
Distributions paid to noncontrolling interests of consolidated affiliates	(51.9		)	(64.9		)
Taxes paid on behalf of employees for shares withheld	(19.8		)	(11.6		)
Contributions from consolidated affiliates	20.8			3.5
Other, net	0.4			5.3
Net cash used in financing activities	(358.8		)	(410.5		)
Increase (decrease) in cash and cash equivalents	13.9			(21.1		)
Cash and cash equivalents at beginning of period	40.5			61.6
Cash and cash equivalents at end of period	$	54.4		$	40.5
Supplemental schedule of noncash financing activity:
Conversion of convertible debt	$	319.4		$	—

10

Encompass Health Corporation and Subsidiaries

Supplemental Information

Earnings Per Share

	QTD								YTD
	Q4 2017				Q4 2016				Q4 2017			Q4 2016
	(In Millions, Except Per Share Data)
Adjusted EBITDA	$	208.2			$	198.8			$	823.1		$	793.6
Interest expense and amortization of debt discounts and fees	(35.9		)		(41.6		)		(154.4		)	(172.1		)
Depreciation and amortization	(46.6		)		(43.8		)		(183.8		)	(172.6		)
Stock-based compensation expense	(9.8		)		(10.0		)		(47.7		)	(27.4		)
Noncash (loss) gain on disposal of assets	(1.3		)		1.3				(4.6		)	(0.7		)
	114.6				104.7				432.6			420.8
Certain items non-indicative of ongoing operating performance:
Professional fees—accounting, tax, and legal	—				—				—			(1.9		)
Loss on early extinguishment of debt	—				—				(10.7		)	(7.4		)
Tax reform impact on noncontrolling interests	(4.6		)		—				(4.6		)	—
Pre-tax income	110.0				104.7				417.3			411.5
Income tax expense	(49.2		)	(1)	(39.7		)	(2)	(160.6		)	(163.9		)
Income from continuing operations (3)	$	60.8			$	65.0			$	256.7		$	247.6
Basic shares	97.6				88.6				93.7			89.1
Diluted shares	99.2				99.2				99.3			99.5
Basic earnings per share (3)	$	0.62			$	0.73			$	2.73		$	2.77
Diluted earnings per share (3)	$	0.61			$	0.68			$	2.69		$	2.59

⁽¹⁾  The application of the lower income tax rate that resulted from the Tax Cuts and Jobs Act to the Company’s net deferred tax assets resulted in a net $1.2 million increase in tax expense in Q4 2017. Application of the new tax rate to the Company’s joint venture entities’ deferred tax liabilities resulted in a net reduction in tax expense in Q4 2017. The Company’s joint venture partners’ share of this net tax benefit was $4.6 million, which resulted in an increase in noncontrolling interest expense in Q4 2017.

⁽²⁾  The Company benefited from a lower state tax rate driven by the Reliant and CareSouth acquisitions.

⁽³⁾  Income from continuing operations attributable to Encompass Health

11

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	Q4					Full Year
	2017		2016			2017			2016
Earnings per share, as reported	$	0.61	$	0.68		$	2.69		$	2.59
Adjustments, net of tax:
Professional fees — accounting, tax, and legal	—		—			—			0.01
Mark-to-market adjustments for stock appreciation rights	—		0.02			0.08			0.01
Income tax adjustments	0.03		(0.01		)	(0.08		)	(0.01		)
Tax reform impact	0.06		—			0.06			—
Loss on early extinguishment of debt	—		—			—			0.04
Sale of pediatric home health assets and hospital	—		0.03			—			0.02
Adjusted earnings per share*	$	0.70	$	0.72		$	2.76		$	2.67

* Adjusted EPS may not sum due to rounding.

12

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Three Months Ended December 31, 2017
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Appreciation Rights			Income Tax Adjustments		Tax Reform Impact		As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	208.2		$	—		$	—	$	—	$	208.2
Depreciation and amortization	(46.6		)	—			—		—		(46.6		)
Interest expense and amortization of debt discounts and fees	(35.9		)	—			—		—		(35.9		)
Stock-based compensation	(9.8		)	(0.6		)	—		—		(10.4		)
Loss on disposal of assets	(1.3		)	—			—		—		(1.3		)
Tax reform impact on noncontrolling interests	(4.6		)	—			—		4.6		—
Income from continuing operations before income tax expense	110.0			(0.6		)	—		4.6		114.0
Provision for income tax expense	(49.2		)	0.3			2.7		1.2		(45.0		)
Income from continuing operations attributable to Encompass Health	$	60.8		$	(0.3	)	$	2.7	$	5.8	$	69.0
Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax	—										—
Numerator for diluted earnings per share	$	60.8									$	69.0
Diluted earnings per share from continuing operations, as reported**	$	0.61		$	—		$	0.03	$	0.06	$	0.70
Diluted shares used in calculation	99.2

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

13

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Three Months Ended December 31, 2016
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Appreciation Rights			Sale of Pediatric Home Health Assets and Hospital			Income Tax Valuation and Other Adjustments			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	198.8		$	—		$	—		$	—		$	198.8
Depreciation and amortization	(43.8		)	—			—			—			(43.8		)
Interest expense and amortization of debt discounts and fees	(41.6		)	—			—			—			(41.6		)
Stock-based compensation	(10.0		)	3.0			—			—			(7.0		)
Loss on disposal of assets	1.3			—			(3.3		)	—			(2.0		)
Income from continuing operations before income tax expense	104.7			3.0			(3.3		)	—			104.4
Provision for income tax expense	(39.7		)	(1.1		)	6.1			(0.6		)	(35.3		)	(1)
Income from continuing operations attributable to Encompass Health	$	65.0		$	1.9		$	2.8		$	(0.6	)	$	69.1
Add: Interest on convertible debt, net of tax	2.5												2.5
Numerator for diluted earnings per share	$	67.5											$	71.6
Diluted earnings per share from continuing operations**	$	0.68		$	0.02		$	0.03		$	(0.01	)	$	0.72
Diluted shares used in calculation	99.2

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

⁽¹⁾ The Company benefited from a lower state tax rate driven by the Reliant and CareSouth acquisitions.

14

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Year Ended December 31, 2017
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Appreciation Rights			Tax Reform Impact		Loss on Early Extinguishment of Debt			Income Tax Adjustments			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	823.1		$	—		$	—	$	—		$	—		$	823.1
Depreciation and amortization	(183.8		)	—			—		—			—			(183.8		)
Loss on early extinguishment of debt	(10.7		)	—			—		0.3			—			(10.4		)
Interest expense and amortization of debt discounts and fees	(154.4		)	—			—		—			—			(154.4		)
Stock-based compensation	(47.7		)	13.3			—		—			—			(34.4		)
Loss on disposal of assets	(4.6		)	—			—		—			—			(4.6		)
Tax reform impact on noncontrolling interests	(4.6		)	—			4.6		—			—			—
Income from continuing operations before income tax expense	417.3			13.3			4.6		0.3			—			435.5
Provision for income tax expense	(160.6		)	(5.3		)	1.2		(0.1		)	(7.7		)	(172.5		)
Income from continuing operations attributable to Encompass Health	$	256.7		$	8.0		$	5.8	$	0.2		$	(7.7	)	$	263.0
Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax	10.8														10.8
Numerator for diluted earnings per share	$	267.5													$	273.8
Diluted earnings per share from continuing operations, as reported**	$	2.69		$	0.08		$	0.06	$	—		$	(0.08	)	$	2.76
Diluted shares used in calculation	99.3

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

15

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Year Ended December 31, 2016
				Adjustments
	As Reported				Prof. Fees - Acct., Tax, & Legal			Mark-to-Market Adjustment for Stock Appreciation Rights			Loss on Early Exting. of Debt			Sale of Pediatric Home Health Assets and Hospital			Income Tax Valuation Allowance & Other Adj.			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	793.6			$	—		$	—		$	—		$	—		$	—		$	793.6
Depreciation and amortization	(172.6		)		—			—			—			—			—			(172.6		)
Professional fees - accounting, tax, and legal	(1.9		)		1.9			—			—			—			—			—
Loss on early extinguishment of debt	(7.4		)		—			—			7.4			—			—			—
Interest expense and amortization of debt discounts and fees	(172.1		)		—			—			—			—			—			(172.1		)
Stock-based compensation	(27.4		)		—			1.6			—			—			—			(25.8		)
Loss on disposal of assets	(0.7		)		—			—			—			(4.2		)	—			(4.9		)
Income from continuing operations before income tax expense	411.5				1.9			1.6			7.4			(4.2		)	—			418.2
Provision for income tax expense	(163.9		)		(0.8		)	(0.6		)	(3.0		)	6.5			(0.6		)	(162.4		)
Income from continuing operations attributable to Encompass Health	$	247.6			$	1.1		$	1.0		$	4.4		$	2.3		$	(0.6	)	$	255.8
Add: Interest on convertible debt, net of tax	9.7																			9.7
Numerator for diluted earnings per share	$	257.3																		$	265.5
Diluted earnings per share from continuing operations**	$	2.59			$	0.01		$	0.01		$	0.04		$	0.02		$	(0.01	)	$	2.67
Diluted shares used in calculation	99.5

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

16

Encompass Health Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Income to Adjusted EBITDA

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2017			2016			2017			2016
	(In Millions)
Net income	$	86.5		$	82.1		$	335.4		$	318.1
Loss (income) from discontinued operations, net of tax, attributable to Encompass Health	0.2			(0.3		)	0.4			—
Provision for income tax expense	49.2			39.7			160.6			163.9
Interest expense and amortization of debt discounts and fees	35.9			41.6			154.4			172.1
Professional fees—accounting, tax, and legal	—			—			—			1.9
Loss on early extinguishment of debt	—			—			10.7			7.4
Net noncash loss (gain) on disposal or impairment of assets	1.3			(1.3		)	4.6			0.7
Depreciation and amortization	46.6			43.8			183.8			172.6
Stock-based compensation expense	9.8			10.0			47.7			27.4
Net income attributable to noncontrolling interests	(25.9		)	(16.8		)	(79.1		)	(70.5		)
Tax reform impact on noncontrolling interests	4.6			—			4.6			—
Adjusted EBITDA	$	208.2		$	198.8		$	823.1		$	793.6

Reconciliation of Segment Adjusted EBITDA to Income from Continuing Operations

Before Income Tax Expense

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2017			2016			2017			2016
	(In Millions)
Total segment Adjusted EBITDA	$	241.5		$	225.6		$	947.1		$	899.6
General and administrative expenses	(43.1		)	(36.8		)	(171.7		)	(133.4		)
Depreciation and amortization	(46.6		)	(43.8		)	(183.8		)	(172.6		)
(Loss) gain on disposal of assets	(1.3		)	1.3			(4.6		)	(0.7		)
Professional fees — accounting, tax, and legal	—			—			—			(1.9		)
Loss on early extinguishment of debt	—			—			(10.7		)	(7.4		)
Interest expense and amortization of debt discounts and fees	(35.9		)	(41.6		)	(154.4		)	(172.1		)
Net income attributable to noncontrolling interests	25.9			16.8			79.1			70.5
Tax reform impact on noncontrolling interests	(4.6		)	—			(4.6		)	—
Income from continuing operations before income tax expense	$	135.9		$	121.5		$	496.4		$	482.0

17

Encompass Health Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2017			2016			2017			2016
	(In Millions)
Net cash provided by operating activities	$	151.4		$	135.0		$	657.2		$	634.4
Provision for doubtful accounts	(9.7		)	(14.5		)	(52.4		)	(61.2		)
Professional fees—accounting, tax, and legal	—			—			—			1.9
Interest expense and amortization of debt discounts and fees	35.9			41.6			154.4			172.1
Equity in net income of nonconsolidated affiliates	1.8			2.5			8.0			9.8
Net income attributable to noncontrolling interests in continuing operations	(25.9		)	(16.8		)	(79.1		)	(70.5		)
Amortization of debt-related items	(1.0		)	(3.5		)	(8.7		)	(13.8		)
Distributions from nonconsolidated affiliates	(2.0		)	(2.6		)	(8.6		)	(8.5		)
Current portion of income tax expense	24.9			17.4			85.0			31.0
Change in assets and liabilities	28.3			39.6			60.9			91.3
Net premium paid on bond transactions	—			—			—			5.8
Tax reform impact on noncontrolling interests	4.6			—			4.6			—
Cash (provided by) used in operating activities of discontinued operations	(0.1		)	0.1			0.6			0.7
Other	—			—			1.2			0.6
Consolidated Adjusted EBITDA	$	208.2		$	198.8		$	823.1		$	793.6

18

Encompass Health Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2017			2016			2017			2016
	(In Millions)
Net cash provided by operating activities	$	151.4		$	135.0		$	657.2		$	634.4
Impact of discontinued operations	(0.1		)	0.1			0.6			0.7
Net cash provided by operating activities of continuing operations	151.3			135.1			657.8			635.1
Capital expenditures for maintenance	(46.2		)	(39.7		)	(138.3		)	(104.2		)
Distributions paid to noncontrolling interests of consolidated affiliates	(13.6		)	(15.4		)	(51.9		)	(64.9		)
Items non-indicative of ongoing operations:
Net premium on bond issuance/repayment	—			—			—			5.8
Transaction costs and related assumed liabilities	—			—			—			0.8
Cash paid for:
Professional fees—accounting, tax, and legal	—			—			—			1.9
Adjusted free cash flow	$	91.5		$	80.0		$	467.6		$	474.5

For the three months ended December 31, 2017, net cash used in investing activities was $75.3 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended December 31, 2017 was $89.3 million and resulted primarily from net debt repayments associated with the Company's revolving credit facility, cash dividends paid on common stock, and distributions to noncontrolling interests of consolidated affiliates.

For the three months ended December 31, 2016, net cash used in investing activities was $88.7 million and resulted primarily from capital expenditures and acquisitions of businesses offset by the proceeds from the disposal of the home health pediatric assets. Net cash used in financing activities during the three months ended December 31, 2016 was $82.2 million and resulted primarily from repurchases of common stock in the open market and cash dividends paid on common stock.

For the year ended December 31, 2017, net cash used in investing activities was $284.5 million and resulted primarily from capital expenditures and acquisitions of businesses. Net cash used in financing activities during the year ended December 31, 2017 was $358.8 million and resulted primarily from net debt repayments associated with the Company's credit agreement, cash dividends paid on common stock, distributions to noncontrolling interests of consolidated affiliates, and repurchases of common stock in the open market.

For the year endedDecember 31, 2016,net cash used in investing activities was $245.0 million and resulted primarily from capital expenditures and acquisitions of businesses offset by the proceeds from the disposal of the home health pediatric assets. Net cash used in financing activities during the year endedDecember 31, 2016was$410.5 million and resulted primarily from the redemption of the Company's 7.75% Senior Notes due 2022, cash dividends paid on common stock, repurchases of common stock in the open market, and distributions to noncontrolling interests of consolidated affiliates.

19

Encompass Health Corporation and Subsidiaries

Forward-Looking Statements

Statements contained in this press release which are not historical facts, such as those relating to financial guidance and assumptions, balance sheet and cash flow plans, and anticipated acquisitions, are forward-looking statements. In addition, Encompass Health, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date hereof, and Encompass Health undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information, involve a number of risks and uncertainties, and relate to, among other things, future events, Encompass Health's plan to repurchase its debt or equity securities, dividend strategies, effective income tax rates, Encompass Health's business strategy, its financial plans, its future financial performance, its projected business results or model, its ability to return value to shareholders, its projected capital expenditures, its leverage ratio, its acquisition opportunities, and the impact of future legislation or regulation. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by Encompass Health include, but are not limited to, the price of Encompass Health's common stock as it affects the Company's willingness and ability to repurchase shares and the financial and accounting effects of any repurchases; any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings involving Encompass Health, including its pending DOJ and HHS-OIG investigations and any matters related to yet undiscovered issues, if any, in acquired operations; Encompass Health's ability to attract and retain key management personnel; any adverse effects on Encompass Health's stock price resulting from the integration of acquired operations; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of Encompass Health's information systems, including unauthorized access to or theft of patient, business associate, or other sensitive information or inability to provide patient care because of system unavailability as well as unforeseen issues, if any, related to integration of acquired systems; the ability to successfully integrate acquired operations, including realization of anticipated tax benefits, revenues, and cost savings, minimizing the negative impact on margins arising from the changes in staffing and other operating practices, and avoidance of unforeseen exposure to liabilities; Encompass Health's ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with its growth strategy; changes, delays in (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for Encompass Health's services by governmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels, including as part of national healthcare reform and deficit reduction; competitive pressures in the healthcare industry and Encompass Health's response thereto; Encompass Health's ability to obtain and retain favorable arrangements with third-party payors; Encompass Health's ability to control costs, particularly labor and employee benefit costs, including group medical expenses; adverse effects resulting from coverage determinations made by Medicare Administrative Contractors regarding its Medicare reimbursement claims and lengthening delays in Encompass Health's ability to recover improperly denied claims through the administrative appeals process on a timely basis; Encompass Health's ability to adapt to changes in the healthcare delivery system, including involvement in coordinated care initiatives or programs that may arise with its referral sources; Encompass Health's ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages and the impact on Encompass Health's labor expenses from potential union activity and staffing shortages; general conditions in the economy and capital markets, including any crisis resulting from uncertainty in the sovereign debt market; the increase in the costs of defending and insuring against alleged professional liability claims and Encompass Health's ability to predict the estimated costs related to such claims; and other factors which may be identified from time to time in Encompass Health's SEC filings and other public announcements, including Encompass Health's Form 10‑K for the year ended December 31, 2017, when filed.

20

EX-99.2

Fourth Quarter 2017 Earnings Call February 27, 2018 Supplemental Information

Encompass Health 2 The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect Encompass Health’s current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, capital expenditures, acquisition and other development activities, cyber security, dividend strategies, repurchases of securities, effective tax rates, financial performance, financial assumptions, business model, balance sheet and cash flow plans, disintermediation, and shareholder value-enhancing transactions. These estimates, projections and other forward-looking information are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual events or results, and those differences may be material. There can be no assurance any estimates, projections or forward-looking information will be realized. All such estimates, projections and forward-looking information speak only as of the date hereof. Encompass Health undertakes no duty to publicly update or revise the information contained herein. You are cautioned not to place undue reliance on the estimates, projections and other forward-looking information in this presentation as they are based on current expectations and general assumptions and are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the year ended December 31, 2017, when filed, and in other documents Encompass Health previously filed with the SEC, many of which are beyond Encompass Health’s control, that may cause actual events or results to differ materially from the views, beliefs and estimates expressed herein. Note Regarding Presentation of Non-GAAP Financial Measures The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA, leverage ratios, adjusted earnings per share, and adjusted free cash flow. Schedules are attached that reconcile the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. The Company’s Form 8-K, dated February 26, 2018, to which the following presentation is attached as Exhibit 99.2, provides further explanation and disclosure regarding Encompass Health’s use of non-GAAP financial measures and should be read in conjunction with this Investor Reference Book. Forward-Looking Statements

Encompass Health 3 Q4 2017 Summary............................................................................................................... 4-5 Rebranding and Name Change ................................................................................................ 6 Clinical Collaboration Rate.................................................................................................... 7 Inpatient Rehabilitation Segment ............................................................................................ 8-9 Home Health & Hospice Segment ............................................................................................ 10-11 Consolidated Adjusted EBITDA................................................................................................ 12 Earnings per Share.............................................................................................................. 13-14 Adjusted Free Cash Flow ...................................................................................................... 15 Guidance ......................................................................................................................... 16-17 Free Cash Flow.................................................................................................................. 18-19 Appendix Map of Locations................................................................................................................ 21 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment........................................................ 22 Expansion Activity .............................................................................................................. 23 Estimated Impact of New Revenue Recognition Accounting Standard.................................................. 24 Business Outlook ................................................................................................................ 25-27 Debt Schedule and Maturity Profile.......................................................................................... 28-29 Overview of Rollover Shares .................................................................................................. 30 New-Store/Same-Store Growth............................................................................................... 31-32 Payment Sources (Percent of Revenues) .................................................................................... 33 Inpatient Rehabilitation Operational and Labor Metrics.................................................................. 34 Home Health & Hospice Operational Metrics............................................................................... 35 Share Information .............................................................................................................. 36 Segment Operating Results.................................................................................................... 37-38 Reconciliations to GAAP ....................................................................................................... 39-47 End Notes ........................................................................................................................ 48-50 Table of Contents

Encompass Health 4 Q4 2017 Summary Q4 Full Year (In Millions) Q4 2017 Q4 2016 Growth 2017 2016 Growth Encompass Health Consolidated Net operating revenues $ 1,019.7 $ 949.9 7.3% $ 3,971.4 $ 3,707.2 7.1% Adjusted EBITDA $ 208.2 $ 198.8 4.7% $ 823.1 $ 793.6 3.7% Inpatient Rehabilitation Segment Net operating revenues $ 810.8 $ 767.6 5.6% $ 3,188.1 $ 3,021.1 5.5% Adjusted EBITDA $ 207.1 $ 197.6 4.8% $ 821.2 $ 797.2 3.0% Home Health and Hospice Segment Net operating revenues $ 208.9 $ 182.3 14.6% $ 783.3 $ 686.1 14.2% Adjusted EBITDA $ 34.4 $ 28.0 22.9% $ 125.9 $ 102.4 22.9% Major takeaways: u Strong Q4 2017 revenue growth in both segments Ÿ Inpatient rehabilitation growth driven by volume ü Discharge growth of 5.9%; same store = 3.9% ü Net revenue per discharge was flat. ü Holiday-related timing differences favorably impacted discharge growth and negatively impacted net patient revenue per discharge. Ÿ Home health and hospice growth driven by volume ü Admissions growth of 13.6%; same store = 10.1% ü Revenue per episode decrease of 1.1% u Consolidated Adjusted EBITDA increased 4.7% to $208.2 million in Q4 2017 u Adjusted EPS of $0.70 per diluted share in Q4 2017 and $2.76 per diluted share in FY 2017 - see pages 13 and 14. u FY 2017 adjusted free cash flow of $467.6 million - see page 15. Reconciliations to GAAP provided on pages 39-47

Encompass Health 5 Q4 2017 Summary (cont.) u Expansion Activity (see page 23) – Began operating a new 40-bed inpatient rehabilitation hospital in Pearland, TX – Expanded existing inpatient rehabilitation hospitals by 63 beds – Acquired two home health locations in Georgia and Alabama u Balance Sheet – Leverage ratio of 3.1x at end of 2017 u Shareholder Distributions – Paid quarterly cash dividend of $0.25 per share in October 2017 – Declared a $0.25 per share quarterly cash dividend in October 2017 (paid in January 2018)

Encompass Health 6 Rebranding and Name Change u The Company’s rebranding and name change reinforce its existing strategy and position as an integrated provider of inpatient and home-based care. Ÿ Effective January 1, 2018, HealthSouth Corporation changed its name to Encompass Health Corporation, with a corresponding ticker symbol change from “HLS” to “EHC.” Ÿ Both business segments — inpatient rehabilitation and home health and hospice — will fully transition to the Encompass Health branding by the end of the first quarter of 2019. Ÿ Total rebranding investment estimated to be ~$25 million to $30 million, to be incurred between 2017 and 2019 2017 2018 2019 Total Operating expenses* ~$6 million ~$11 to $13 million ~$1 to $2 million ~$18 to $21 million Capital expenditures ~$1 million ~$5 to $6 million ~$1 to $2 million ~$7 to $9 million Total rebranding investment ~$7 million ~$16 to $19 million ~$2 to $4 million ~$25 to $30 million *Included in corporate general and administrative expenses line item

Encompass Health 7 The Company Continues to Improve the Patient Experience Through Integrated Care Delivery Inpatient Rehabilitation–Home Health Clinical Collaboration (All Payors) Overlap Markets* Q4 2016 Q4 2017 10,074 10,660 3,963 4,939 28.2% Collaboration Rate 31.7% Collaboration Rateu As of December 31, 2017, ~60% of Encompass Health’s inpatient rehabilitation hospitals were located within overlap markets.* u The clinical collaboration rate with Encompass Health’s inpatient rehabilitation hospitals increased by 350 basis points in Q4 2017 compared to Q4 2016. u The Company’s clinical collaboration rate objective for overlap markets is 35% to 40% within the next two years. u TeamWorks clinical collaboration is a process to identify and standardize best practices for integrated patient care. Ÿ Initiative launched in February 2017 Ÿ Began piloting redesigned clinical collaboration process in July 2017 Ÿ Implementation completed in December 2017 Encompass Health IRF Discharges to: Encompass Health Home Health Non-Encompass Health Home Health * Overlap markets have an Encompass Health IRF and an Encompass Health home health location within a 30-mile radius, excluding markets that have home health licensure barriers. Home health locations in overlap markets are open for 12 months before inclusion in the clinical collaboration rate.

Encompass Health 8 Inpatient Rehabilitation Segment - Revenue Q4 Q4 Favorable/ ($millions) 2017 2016 (Unfavorable) Net operating revenues: Inpatient $ 784.7 $ 740.9 5.9% Outpatient and other 26.1 26.7 (2.2%) Total segment revenue $ 810.8 $ 767.6 5.6% (Actual Amounts) Discharges 43,910 41,474 5.9% Same-store discharge growth 3.9% Net patient revenue per discharge $ 17,871 $ 17,864 —% u Revenue growth was driven by volume growth. Ÿ New-store discharge growth resulted from joint ventures in Gulfport, MS (April 2017), Westerville, OH (April 2017), and Jackson, TN (July 2017) and wholly owned hospitals in Modesto, CA (October 2016) and Pearland, TX (October 2017). Ÿ Holiday-related timing differences favorably impacted discharge growth and negatively impacted revenue per discharge. u Outpatient and other revenue decreased in Q4 2017 notwithstanding $1.9 million in provider tax recoveries.

Encompass Health 9 Inpatient Rehabilitation Segment - Adjusted EBITDA Q4 % of Revenue Q4 % of Revenue($millions) 2017 2016 Net operating revenues $ 810.8 $ 767.6 Less: Provision for doubtful accounts (8.4) 1.0% (13.2) 1.7% Net operating revenues less provision for doubtful accounts 802.4 754.4 Operating expenses: Salaries and benefits (408.1) 50.3% (386.2) 50.3% Other operating expenses(a) (120.4) 14.8% (109.8) 14.3% Supplies (35.1) 4.3% (32.7) 4.3% Occupancy costs (15.6) 1.9% (15.2) 2.0% Hospital operating expenses (171.1) 21.1% (157.7) 20.5% Other income 1.2 0.8 Equity in nonconsolidated affiliates 1.7 2.4 Noncontrolling interests(b) (19.0) (16.1) Segment Adjusted EBITDA $ 207.1 $ 197.6 Percent change 4.8% In arriving at Adjusted EBITDA, the following was excluded: (a) Loss on disposal of assets $ 1.3 $ 2.0 (b) Tax reform impact on noncontrolling interests $ 0.5 $ — u Segment Adjusted EBITDA for the quarter of $207.1 million • Salaries and benefits as a percent of revenue benefited from lower group medical expenses that offset compensation increases and the impact from the ramping up of new stores. • Other operating expenses as a percent of revenue increased primarily due to higher provider tax expense in Q4 2017 and the impact of favorable franchise tax recoveries in Q4 2016. Ÿ Bad debt expense as a percent of revenue decreased due primarily to a reduction in new pre-payment claims denials (see page 22). Reconciliations to GAAP provided on pages 39-47

Encompass Health 10 Home Health and Hospice Segment - Revenue Q4 Q4 Favorable/ ($millions) 2017 2016 (Unfavorable) Net operating revenues: Home health revenue $ 187.3 $ 165.2 13.4 % Hospice revenue 21.6 17.1 26.3 % Total segment revenue $ 208.9 $ 182.3 14.6 % (Actual Amounts) Admissions 31,766 27,957 13.6 % Same-store admissions growth 10.1 % Episodes 56,625 49,253 15.0 % Same-store episode growth 11.2 % Revenue per episode $ 2,989 $ 3,023 (1.1)% u Revenue growth was driven by strong volume growth. Ÿ Approximately 120 basis points of same-store admissions growth resulted from clinical collaboration with Encompass Health’s IRFs. u Decrease in revenue per episode resulted from Medicare reimbursement rate cuts partially offset by changes in patient mix and reconciliation payments attributed to various alternative payment models (e.g., BPCI; ACOs). u Hospice revenue increase primarily was due to acquisitions in 2016.

Encompass Health 11 Q4 % of Revenue Q4 % of Revenue($millions) 2017 2016 Net operating revenues $ 208.9 $ 182.3 Less: Provision for doubtful accounts (1.3) 0.6% (1.3) 0.7% Net operating revenues less provision for doubtful accounts 207.6 181.0 Operating expenses:(a) Cost of services (97.2) 46.5% (89.7) 49.2% Support and overhead costs (73.8) 35.3% (62.7) 34.4% (171.0) 81.9% (152.4) 83.6% Equity in net income of nonconsolidated affiliates 0.1 0.1 Noncontrolling interests(b) (2.3) (0.7) Segment Adjusted EBITDA $ 34.4 $ 28.0 Percent change 22.9% In arriving at Adjusted EBITDA, the following was excluded: (a) Gain on disposal of assets $ — $ (3.3) (b) Tax reform impact on noncontrolling interests $ 4.1 $ — Home Health and Hospice Segment - Adjusted EBITDA * Reconciliation to GAAP provided on pages 29-31 Reconciliations to GAAP provided on pages 39-47 uSegment Adjusted EBITDA for the quarter of $34.4 million. Ÿ Cost of services as a percent of revenue decreased primarily due to staffing productivity gains. Ÿ Support and overhead costs increased as a percent of revenue primarily due to continued investments in additional sales and marketing associates.

Encompass Health 12 Consolidated Adjusted EBITDA ($millions) Q4 2017 % of Consolidated Revenue Q4 2016 % of Consolidated Revenue Inpatient rehabilitation segment Adjusted EBITDA $ 207.1 $ 197.6 Home health and hospice segment Adjusted EBITDA 34.4 28.0 General and administrative expenses* (33.3) 3.3% (26.8) 2.8% Consolidated Adjusted EBITDA $ 208.2 $ 198.8 Percentage change 4.7% General and Administrative Expenses Associated with Rebranding and TeamWorks ($millions) Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Rebranding and name change $ 0.5 $ 1.7 $ 1.5 $ 2.5 $ 6.2 TeamWorks clinical collaboration(1) — 1.7 2.3 0.4 4.4 * General and administrative expenses in the above table exclude stock compensation of $9.8 million and $10.0 million for the fourth quarter of 2017 and 2016, respectively. . Reconciliations to GAAP provided on pages 39-47; Refer to pages 48-50 for end notes. Consolidated Adjusted EBITDA for the quarter of $208.2 million u General and administrative expenses increased as a percent of consolidated revenue primarily due to a year-over-year increase in incentive compensation, as well as expenses associated with the Company’s rebranding and name change, and the TeamWorks clinical collaboration initiative.

Encompass Health 13 Earnings per Share - As Reported Q4 Year Ended (In Millions, Except Per Share Data) 2017 2016 2017 2016 Consolidated Adjusted EBITDA $ 208.2 $ 198.8 $ 823.1 $ 793.6 Interest expense and amortization of debt discounts and fees (35.9) (41.6) (154.4) (172.1) Depreciation and amortization (46.6) (43.8) (183.8) (172.6) Stock-based compensation expense (9.8) (10.0) (47.7) (27.4) Noncash (loss) gain on disposal of assets (1.3) 1.3 (4.6) (0.7) 114.6 104.7 432.6 420.8 Certain items non-indicative of ongoing operating performance: Loss on early extinguishment of debt — — (10.7) (7.4) Professional fees — accounting, tax, and legal — — — (1.9) Tax reform impact on noncontrolling interests(2) (4.6) — (4.6) — Pre-tax income 110.0 104.7 417.3 411.5 Income tax expense(2) (49.2) (39.7) (160.6) (163.9) Income from continuing operations* $ 60.8 $ 65.0 $ 256.7 $ 247.6 Interest and amortization on 2.0% Convertible Senior Subordinated Notes (net of tax)(3) — 2.5 4.6 9.7 Loss on extinguishment of 2.0% Convertible Senior Subordinated Notes (net of tax)(3) — — 6.2 — Diluted shares (see page 36) 99.2 99.2 99.3 99.5 Diluted earnings per share*(3) $ 0.61 $ 0.68 $ 2.69 $ 2.59 u EPS for the fourth quarter of 2017 were impacted by: Ÿ Lower interest expense due primarily to the Company’s exercise of its early redemption option on its 2.0% Convertible Senior Subordinated Notes in Q2 2017 Ÿ Higher depreciation and amortization resulting from capital investments Ÿ Income tax reform(2) uEPS for full-year 2017 were impacted by the items discussed above for Q4 2017 as well as: Ÿ Higher stock-based compensation expense Ÿ Loss on early extinguishment of debt due to the Company’s exercise of its early redemption option on its 2.0% Convertible Senior Subordinated Notes in Q2 2017 uEPS for Q4 2016 and full-year 2016 were impacted by the gain on the sale of the Company’s pediatric home heath assets in Q4 2016. uEPS for full-year 2016 were impacted by the loss on early extinguishment of debt associated with the redemptions of the 7.75% Senior Notes due 2022. * Earnings per share are determined using income from continuing operations attributable to Encompass Health. Refer to pages 48-50 for end notes.

Encompass Health 14 Q4 Year Ended 2017 2016 2017 2016 Earnings per share, as reported $ 0.61 $ 0.68 $ 2.69 $ 2.59 Adjustments, net of tax: Professional fees — accounting, tax, and legal — — — 0.01 Mark-to-market adjustment for stock appreciation rights(5) — 0.02 0.08 0.01 Income tax adjustments(6) 0.03 (0.01) (0.08) (0.01) Tax reform impact(2) 0.06 — 0.06 — Loss on early extinguishment of debt(3) — — — 0.04 Sale of pediatric home health assets and hospital — 0.03 — 0.02 Adjusted earnings per share* $ 0.70 $ 0.72 $ 2.76 $ 2.67 Adjusted Earnings per Share(4) * Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 44-47 Refer to pages 48-50 for end notes. Adjusted earnings per share removes from the GAAP earnings per share calculation the impact of items the Company believes are non-indicative of its ongoing operating performance.

Encompass Health 15 Adjusted Free Cash Flow FY 2016 (7) Adjusted EBITDA Working Capital and Other Cash Interest Expense Cash Tax Payments, Net of Refunds Maintenance Capital Expenditures Adjusted Free Cash Flow FY 2017 $474.5 $29.5 $47.6 $12.7 ($62.6) ($34.1) $467.6 2017 Adjusted Free Cash Flow(7) Reconciliations to GAAP provided on pages 39-47 Refer to pages 48-50 for end notes. u Adjusted free cash flow in full-year 2017 decreased primarily as a result of increased cash payments for taxes and increased maintenance capital expenditures. Ÿ Cash payments for taxes increased due to exhaustion of federal NOL in Q1 2017. Ÿ Increased maintenance capital expenditures resulted from leasehold improvements and furnishings associated with the Company’s new home office location, refurbishments at certain larger hospitals, growth in the IRF segment, and an enhanced hospital maintenance program. Ÿ Working capital decreased primarily due to improved collection of accounts receivable (fewer claims denials) and lower cash distributions to joint venture partners (certain joint venture partners funded their share of capital investments through reductions in cash distributions).

Encompass Health 16* See also the "Estimated Impact of the New Revenue Recognition Accounting Standard" on page 24.Refer to pages 48-50 for end notes. Guidance Adjusted EBITDA(8) Adjusted Earnings per Share from Continuing Operations Attributable to Encompass Health(4) Net Operating Revenues* 2018 Guidance Net Operating Revenues* Adjusted EBITDA(8) $830 million to $850 million Adjusted Earnings per Share from Continuing Operations Attributable to Encompass Health(4) $3.25 to $3.40 $3,971.4 million $823.1 million $2.76 $4,150 million to $4,250 million 2017 Actuals

Encompass Health 17 2018 Guidance Considerations Inpatient Rehabilitation u Estimated 0.8% increase in Medicare pricing for Q1 through Q3; ~1.25% for Q4 u Salary increase of ~3.0%; benefits increase of ~8.0% to 12.0% u Bad debt expense of 1.6% to 1.9% of net operating revenues Home Health and Hospice u Estimated 0.5% net Medicare pricing reduction for CY 2018 u Salary increase of ~3.0%; benefits increase of ~8.0% to 12.0% u Inclusive of home health and hospice acquisitions in 2018 Consolidated u Includes approximately $11 million to $13 million of operating expenses (included in corporate general and administrative expenses) associated with the rebranding and name change u Diluted share count of ~99.5 million shares u Tax rate of ~28% (includes impact from Tax Cuts and Jobs Act)

Encompass Health 18 u Increased cash payments for taxes in 2018 primarily due to exhaustion of federal NOL in Q1 2017 Adjusted Free Cash Flow(7) Assumptions Reconciliations to GAAP provided on pages 39-47. Refer to pages 48-50 for end notes. Certain Cash Flow Items (millions) 2017 Actuals 2018 Assumptions • Cash interest expense (net of amortization of debt discounts and fees) $145.7 $140 to $150 • Cash payments for taxes, net of refunds $94.5 $105 to $135 • Working capital and other $(23.0) $50 to $70 • Maintenance CAPEX $138.3 $130 to $150 • Adjusted Free Cash Flow $467.6 $325 to $425 u Maintenance capital expenditures in 2018 reflect completion of new home office and completion of the ACE-IT installation, offset by expenditures associated with rebranding. u Working capital increase in 2018 due to expected resumption of Medicare pre-payment claims denials

Encompass Health 19 Uses of Free Cash Flow 2017 Actuals 2018 Assumptions Growth in Core Business IRF bed expansions $25.5 $30 to $40 New IRFs - De novos 75.2 80 to 110 - Acquisitions 10.9 opportunistic - Replacement IRFs and other 9.7 40 to 50 New home health and hospice acquisitions 27.9 50 to 100 $149.2 $200 to $300, excluding IRF acquisitions Debt Reduction Debt redemptions (borrowings), net $163.0 $ opportunistic Shareholder Distributions Cash dividends on common stock(9) 91.5 ~100 Purchase of Home Health Holdings rollover shares (see page 30) N/A ~65 Common stock repurchases $38.1 opportunistic $292.6 $TBD Quarterly cash dividend currently set at $0.25 per common share ~$58 million authorization remaining as of December 31, 2017 Net redemptions in 2017 exclude ~$276 million associated with the non- cash conversion of the Convertible Senior Subordinated Notes. See the debt schedule on page 28. Refer to pages 48-50 for end notes.

Appendix

Encompass Health 21 Portfolio as of December 31, 2017 Inpatient Rehabilitation Hospitals (“IRFs”) Home Health Locations Hospice Locations 7 Future IRFs** 36 States and Puerto Rico ~37,900 Employees * Excluding markets that have home health licensure barriers ** Previously announced under development † Based on 2016 data Note: One of the 127 IRFs and two of the 200 home health locations are nonconsolidated. These locations are accounted for using the equity method of accounting. Encompass Health A Leading Provider of Inpatient Rehabilitation and Home-Based Care Market Overlap ~60% of EHC’s IRFs have an EHC home health location within a 30-mile radius.* Inpatient Rehabilitation - 12/31/17 127 IRFs (42 are Joint Ventures) 31 States and Puerto Rico ~29,400 Employees 22% of Licensed Beds† 29% of Medicare Patients Served† Key Statistics - Full-Year 2017 171,922 Inpatient Discharges ~$3.2 Billion in Revenue Home Health and Hospice - 12/31/17 200 Home Health Locations 37 Hospice Locations 28 States ~8,500 Employees Key Statistics - Full-Year 2017 124,870 Home Health Admissions 4,870 Hospice Admissions ~$783 Million in Revenue Largest Owner and Operator of IRFs 4th Largest Provider of Medicare-Certified Skilled Home Health Services

Encompass Health 22 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment Impact to Income Statement Period New Denials Collections of Previously Denied Claims Bad Debt Expense for New Denials Update of Reserve for Prior Denials (In Millions) Q4 2017 $0.7 $(7.8) $0.2 $— Q3 2017 7.4 (6.2) 2.2 — Q2 2017 16.5 (7.7) 4.9 — Q1 2017 19.0 (5.9) 5.7 — Q4 2016 17.8 (4.4) 5.4 0.5 Q3 2016 15.7 (8.5) 4.6 — Q2 2016 18.7 (4.9) 4.6 — Q1 2016 22.7 (8.4) 6.0 — Q4 2015 22.5 (4.1) 5.6 (1.3) Q3 2015 22.0 (4.1) 5.9 (1.1) Q2 2015 18.2 (3.8) 4.9 — Q1 2015 16.3 (3.0) 4.2 — Impact to Balance Sheet Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015 (In Millions) Pre-payment claims denials $ 164.0 $ 159.7 $ 114.8 Recorded reserves (49.2) (47.9) (31.2) Net accounts receivable from pre-payment claims denials $ 114.8 $ 111.8 $ 83.6 Background • For several years, under programs designated as “widespread probes,” certain Medicare Administrative Contractors (“MACs”) have conducted pre- payment claim reviews and denied payment for certain diagnosis codes. • Encompass Health appeals most denials. On claims it takes to an administrative law judge (“ALJ”), Encompass Health historically has experienced an approximate 70% success rate. – MACs identify medical documentation issues as a leading basis for denials. – Encompass Health’s investment in clinical information systems and its medical services department has further improved its documentation and reduced technical denials. – However, MACs and other HHS contractors continue to issue denials without regulatory basis. • By statute, ALJ decisions are due within 90 days of a request for hearing, but appeals are taking years. HHS has implemented rule changes to address the backlog of appeals, but their effect is uncertain. • In 2016, a federal court ordered HHS to eliminate the backlog by the end of CY 2020. HHS continues to object that it cannot clear the backlog in the timeframe established by the court. Although HHS remains bound by the order, the courts are considering how HHS will comply. • All Medicare providers continue to experience delays. The backlog is growing because the ALJs receive one year’s worth of appeals every four to six weeks, according to HHS. – Currently, ALJs are hearing Encompass Health appeals from claims denied up to eight years ago. • In summer 2017, CMS announced the Targeted Probe and Educate (“TPE”) initiative. For more information regarding TPE, see https://www.cms.gov/ Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS- Compliance-Programs/Medical-Review/Targeted-Probe-and- EducateTPE.html • Effective February 2018, Palmetto GBA assumed responsibilities for Cahaba’s MAC jurisdiction. See announcement from CMS at https:// www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative- Contractors/Downloads/JurisdictionJAwardFactSheet-09082017.pdf Encompass Health reserves pre-payment claim denials via the provision for doubtful accounts upon notice from a MAC a claim is under review.

Encompass Health 23 Expansion Activity Inpatient Rehabilitation Facilities # of New Beds 2017 2018 2019 De Novo: Pearland, TX (October) 40 — — Shelby County, AL — 34 — Hilton Head, SC — 38 — Murrieta, CA — — 50 Joint Ventures: Gulfport, MS (April) 33 — — Westerville, OH (April) 60 — — Jackson, TN* (July) 48 — — Murrells Inlet, SC — 29 — Winston-Salem, NC — 68 — Lubbock, TX — — 40 Boise, ID — — 40 Bed Expansions, net** 166 ~100 ~100 347 ~269 ~230 * ** Existing wholly owned, 40-bed IRF in Martin, TN became JV in conjunction with this opening Net bed expansions in each year may change due to the timing of certain regulatory approvals and/or construction delays. Q4 2017 acquisition highlights: u Acquired two home health locations in Georgia and Alabama Q4 2017 expansion activity highlights: u Began operating a new 40-bed inpatient rehabilitation hospital in Pearland, TX Expanded existing hospitals by 63 beds 1 2 3 7 Previously Announced IRF Development Projects Underway 3 New States Home Health and Hospice # of locations December 31, 2016 223 Acquisitions 14 Opening of new locations 3 Merging of locations (3) December 31, 2017 237 5 Winston-Salem, NC Gulfport, MS 6 7 4 Boise, ID

Encompass Health 24 Expected Impact of the New Revenue Standard - Historical Periods As Reported Recast Q4-17 Q3-17 Q2-17 Q1-17 FY 2017 FY 2016 Q4-17 Q3-17 Q2-17 Q1-17 FY 2017 FY 2016 Net operating revenue (millions) $1,019.7 $ 995.6 $ 981.3 $ 974.8 $3,971.4 $3,707.2 $1,010.0 $ 983.0 $ 967.6 $ 958.4 $3,919.0 $3,646.0 Provision for doubtful accounts (millions) 9.7 12.6 13.7 16.4 52.4 61.2 — — — — — — Inpatient rehabilitation revenue/discharge 17,871 17,896 17,823 18,131 17,929 17,577 17,693 17,654 17,557 17,812 17,679 17,265 Home health revenue/ episode 2,989 3,022 2,989 2,991 2,998 3,031 2,976 3,008 2,975 2,978 2,984 3,017 Adjusted EBITDA (millions) 208.2 204.6 209.5 200.8 823.1 793.6 No Change Adjusted EPS 0.70 0.66 0.71 0.70 2.76 2.67 No Change Estimated Impact of the New Revenue Recognition Accounting Standard Expected Impact of the New Revenue Standard - 2018 Guidance (in millions, except per share data) Current Recast Net operating revenue $4,150 - 4,250 $4,080 - 4,190 Adjusted EBITDA 830 - 850 No change Adjusted EPS 3.25 - 3.40 No change u During the first quarter of 2018, Encompass Health will adopt a new accounting standard (ASC 606 - Revenue from Contracts with Customers) which clarifies the standards for recognizing revenue. u Based on the Company's current evaluation of the new standard, the expected impact to the Company will be that amounts previously presented as provision for doubtful accounts become a component of consolidated net operating revenue (both segments impacted similarly). • This will have the effect of reducing net operating revenues but will be neutral to Adjusted EBITDA and adjusted EPS. u The Company will retrospectively adopt the new standard during Q1 2018, which means previously reported quarterly and full-year results for 2017 will be updated to reflect the requirements of the new standard.

Encompass Health 25 Business Outlook: 2018 to 2020 2018 2019 2020 Key Operational Initiatives • Implement rebranding and name change • Develop and implement post-acute patient navigation tools • Enhance clinical collaboration between the Company’s IRFs and home health locations, including TEAMWORKS initiative to extend best practices across all overlap markets • Refine and expand use of clinical data analytics to further improve patient outcomes (e.g., ReAct; Sepsis Alert) • Increase participation in alternative payment models Core Growth • Same-store IRF growth • New-store IRF growth (de novos and acquisitions) • Same-store home health and hospice growth • New-store home health and hospice growth (acquisitions and de novos) Expansion of Service Offerings • Consider acquisitions of other complementary businesses Strong Balance Sheet • Maintain real estate ownership strategy and balance sheet flexibility Shareholder Distributions • Quarterly cash dividends on common stock • Purchases of Home Health Holdings rollover shares • Opportunistic common stock repurchases

Encompass Health 26 † Estimates are based on current CMS and Congressional Budget Office projections which do not include potential changes from legislation or the CMS rule-making process. Refer to pages 48-50 for end notes. Business Outlook 2018 to 2020: Revenue Assumptions Volume (Includes New Stores) Inpatient Rehabilitation* Home Health* 3+% annual discharge growth 10+% annual admission growth Medicare Pricing Approx. 73% of Revenue Approx. 85% of Revenue FY 2018 Q417-Q318(10) FY 2019 Q418-Q319 Estimate† FY 2020 Q419-Q320 Estimate† CY 2018 Q118-Q418(10) CY 2019 Q119-Q419 Estimate† CY 2020 Q120-Q420(11) Market basket update 1.0% 2.8% 2.9% 1.0% 2.8% 1.5% Healthcare reform reduction - (75) bps - - - - Coding intensity reduction - - - (0.9%) - - Legislative changes to the rural add-on program(11) - - - - ~(0.1%) ~(0.2%) Healthcare reform productivity adjustment - (80) bps (50) bps - (80) bps - Net impact - all providers 1.0% 1.25% 2.4% 0.1% ~1.9% ~1.3% Impact from case mix re-weighting - - - (0.6%) - - Estimated impact to Encompass Health(12) 0.8% (0.5%) Medicare Advantage and Managed Care Pricing Approx. 19% of Revenue Approx. 14% of Revenue Expected Increases 2-4% 2-4% 2-4% 0-2% 0-2% 0-2% * Outpatient and hospice, which services accounted for 4.6% of total operating revenues for full-year 2017, are not included in the pricing assumptions.

Encompass Health 27 Inpatient Rehabilitation Home Health and Hospice Business Outlook 2018 to 2020: Labor and Other Expense Assumptions Salaries and Benefits ~70% IRF Expenses ~30% Salaries and Benefits 2018 2019 2020 Salary increases 2.75-3.25% 2.75-3.25% 2.75-3.25% Benefit costs increases 8-12%* 5-10% 5-10% IRF Expenses •Other operating expenses and supply costs tracking with inflation Salaries and Benefits ~85% Other Expenses ~15% Home Health and Hospice Expenses •Other operating expenses and supply costs tracking with inflation % of Salaries and Benefits Salaries ~90% Benefits ~10% * Expected benefit costs increase in 2018 is reflective of lower group medical expenses incurred in 2017.

Encompass Health 28 Debt Schedule Reconciliations to GAAP provided on pages 39-47. Change in December 31, December 31, Debt vs. ($millions) 2017 2016 YE 2016 Advances under $700 million revolving credit facility, September 2022 - LIBOR +150bps $ 95.0 $ 152.0 $ (57.0) Term loan facility, September 2022 - LIBOR +150bps 294.7 421.2 (126.5) Bonds Payable: 5.125% Senior Notes due 2023 295.9 295.3 0.6 5.75% Senior Notes due 2024 1,193.9 1,193.2 0.7 5.75% Senior Notes due 2025 344.4 343.9 0.5 2.0% Convertible Senior Subordinated Notes due 2043 — 275.7 (275.7) Other notes payable 82.3 55.8 26.5 Capital lease obligations 271.5 279.3 (7.8) Long-term debt $ 2,577.7 $ 3,016.4 $ (438.7) Debt to Adjusted EBITDA 3.1x 3.8x

Encompass Health 29 Debt Maturity Profile - Face Value 2018 2021 2022 2022 2023 2024 2025 $350 Senior Notes 5.75% $1,200 Senior Notes 5.75% $300 Senior Notes 5.125% $95 Drawn + $35 reserved for LC’s As of December 31, 2017* ($ in millions) $570 Available Callable beginning November 2017 Revolver Revolver Capacity $295 Term Loans Callable beginning September 2020 No significant debt maturities prior to 2022 Callable beginning March 2018 * This chart does not include ~$272 million of capital lease obligations or ~$82 million of other notes payable. See the debt schedule on page 28.

Encompass Health 30 Options Holder – The right (but not the obligation) to sell for cash up to 1/3 of the Rollover Shares to the parent after 1/1/18*; 2/3 after 1/1/19; and all outstanding Rollover Shares after 1/1/20 Company – The right (but not the obligation) to purchase for cash all or any portion of the Rollover Shares after 1/1/20 upon 20 days prior written notice Valuation Fair value of the Rollover Shares is determined using the product of Home Health Holdings’ EBITDA for the trailing 12-month period and a median market price multiple based on a basket of public home health companies and recent transactions, less the current balance of the intracompany note(s) to the parent. As of December 31, 2017, the value of the Rollover Shares was ~$192 million. In connection with the 2014 acquisition of Encompass Home Health and Hospice: • Certain members of that management team rolled a portion of their pre- acquisition equity into the post-acquisition entity (“Home Health Holdings”) resulting in a 16.7% ownership interest (the “Rollover Shares”). • Home Health Holdings was capitalized with a promissory note to the parent company totaling ~$385 million (equal to 5.5x the segment’s 2014 EBITDA). This was done to provide the opportunity for leveraged returns on the equity, thereby mimicking a private equity transaction structure. • To the extent Home Health Holdings needs cash (e.g., acquisitions, capex, etc.), such amounts may be added to the principal amount of the note or via the creation of new notes. Cash generated from the operations of Home Health Holdings may be used to pay interest and principal on the note(s). Overview of Rollover Shares Held by Members of the Home Health and Hospice Management Team Background Home Health Holdings Rollover Shares 16.7% * In February 2018, each management investor exercised the right to sell 1/3 of his or her Rollover Shares to EHC, representing ~5.6% of the outstanding common shares of Holdings. EHC settled the acquisition of those shares upon payment of ~$65 million in cash.

Encompass Health 31 25.0 20.0 15.0 10.0 5.0 0.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Fairlawn(13) 2.0% 1.1% New Store 1.8% 4.4% 5.7% 15.6% 14.2% 11.7% 10.7% 1.3% 1.2% 1.9% 2.4% 2.0% Same Store* 2.9% 2.8% 3.9% 3.0% 2.8% 1.9% 1.9% 0.1% 1.6% 1.6% 1.4% 3.9% Total by Qtr. 6.7% 8.3% 9.6% 18.6% 17.0% 13.6% 12.6% 1.4% 2.8% 3.5% 3.8% 5.9% Total by Year 10.9% 10.8% 4.0% Same-Store Year* 3.2% 1.7% 1.8% Same-Store Year UDS(14) 1.3% (0.6)% Reliant (857 beds) Franklin, TN (40 beds) Lexington, KY (158 beds) Savannah, GA (50 beds) * Includes consolidated inpatient rehabilitation hospitals classified as same store during each period Refer to pages 48-50 for end notes. New-Store/Same-Store Growth Inpatient Rehabilitation Pearland, TX (40 beds) Modesto, CA (50 beds) Gulfport, MS (33 beds) Westerville, OH (60 beds) Bryan, TX (49 beds) Broken Arrow, OK (22 beds) Hot Springs, AR (27 beds) Jackson, TN (48 beds)

Encompass Health 32 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017Admissions Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 New Store 43.5% 41.6% 35.4% 8.1% 5.7% 6.4% 6.7% 3.5% Same Store* 12.6% 11.1% 15.3% 14.0% 13.9% 13.3% 8.8% 10.1% Total by Quarter 56.1% 52.7% 50.7% 22.1% 19.6% 19.7% 15.5% 13.6% Total by Year 43.6% 17.0% Same-Store Year* 13.7% 11.4% Acquired CareSouth (44 home health agencies in 7 states) in November 2015 * Includes consolidated home health agencies classified as same store during each period New-Store/Same-Store Growth Home Health u In 2016, the Company acquired or opened 10 home health locations. u In 2017, the Company acquired or opened 15 home health locations.

Encompass Health 33 Payment Sources (Percent of Revenues) Inpatient Rehabilitation Segment Home Health and Hospice Segment Consolidated Q4 Q4 Q4 Full Year 2017 2016 2017 2016 2017 2016 2017 2016 Medicare 73.6% 73.3% 86.1% 84.3% 76.2% 75.3% 75.5% 75.2% Medicare Advantage 8.3% 7.8% 8.9% 8.7% 8.4% 8.0% 8.7% 7.9% Managed care 10.5% 10.9% 3.7% 3.9% 9.1% 9.6% 9.5% 9.8% Medicaid* 3.0% 3.0% 1.1% 3.0% 2.6% 3.0% 2.7% 3.2% Other third-party payors 1.7% 1.9% —% —% 1.4% 1.5% 1.3% 1.4% Workers’ compensation 0.8% 1.1% —% —% 0.6% 0.9% 0.7% 0.8% Patients 0.7% 0.7% 0.1% —% 0.6% 0.6% 0.5% 0.5% Other income 1.4% 1.3% 0.1% 0.1% 1.1% 1.1% 1.1% 1.2% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% * In Q4 2016, the home health and hospice segment sold its pediatric home health assets. As a result, the segment’s percentage of Medicaid has declined.

Encompass Health 34 Inpatient Rehabilitation Operational and Labor Metrics * The decrease in licensed beds from Q1 2016 to Q2 2016 was due to the sale of the IRF in Beaumont, TX (61 beds). Refer to pages 48-50 for end notes. Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2017 2017 2017 2017 2016 2016 2016 2016 2017 2016 (In Millions) Net patient revenue- inpatient $ 784.7 $ 768.6 $ 762.9 $ 766.2 $ 740.9 $ 724.1 $ 721.2 $ 719.4 $ 3,082.4 $ 2,905.5 Net patient revenue- outpatient and other revenues 26.1 26.2 27.1 26.3 26.7 27.6 31.4 29.8 105.7 115.6 Net operating revenues $ 810.8 $ 794.8 $ 790.0 $ 792.5 $ 767.6 $ 751.7 $ 752.6 $ 749.2 $ 3,188.1 $ 3,021.1 (Actual Amounts) Discharges(15) 43,910 42,948 42,805 42,259 41,474 41,368 41,365 41,098 171,922 165,305 Net patient revenue per discharge $ 17,871 $ 17,896 $ 17,823 $ 18,131 $ 17,864 $ 17,504 $ 17,435 $ 17,505 $ 17,929 $ 17,577 Outpatient visits 131,787 138,689 153,415 152,454 154,311 158,981 164,761 162,649 576,345 640,702 Average length of stay 12.6 12.8 12.7 12.9 12.8 12.7 12.6 12.9 12.7 12.8 Occupancy % 67.7% 68.2% 69.3% 71.0% 67.8% 67.8% 68.2% 68.9% 67.8% 67.8% # of licensed beds* 8,851 8,748 8,641 8,528 8,504 8,441 8,430 8,481 8,851 8,504 Occupied beds 5,992 5,966 5,988 6,055 5,766 5,723 5,749 5,843 6,001 5,766 Full-time equivalents (FTEs)(16) 20,739 20,740 20,474 20,254 19,930 19,663 19,503 19,352 20,552 19,612 Contract labor 255 235 251 260 245 241 205 194 250 221 Total FTE and contract labor 20,994 20,975 20,725 20,514 20,175 19,904 19,708 19,546 20,802 19,833 EPOB(17) 3.50 3.52 3.46 3.39 3.50 3.48 3.43 3.35 3.47 3.44

Encompass Health 35 Home Health and Hospice Operational Metrics Refer to pages 48-50 for end notes. Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2017 2017 2017 2017 2016 2016 2016 2016 2017 2016 (In Millions) Net home health revenue $ 187.3 $ 181.2 $ 172.9 $ 165.3 $ 165.2 $ 162.0 $ 157.1 $ 150.9 $ 706.7 $ 635.2 Net hospice and other revenue 21.6 19.6 18.4 17.0 17.1 13.1 11.0 9.7 76.6 50.9 Net operating revenues $ 208.9 $ 200.8 $ 191.3 $ 182.3 $ 182.3 $ 175.1 $ 168.1 $ 160.6 $ 783.3 $ 686.1 Home Health: (Actual Amounts) Admissions(18) 31,766 31,471 30,823 30,810 27,957 27,239 25,753 25,763 124,870 106,712 Recertifications 25,479 24,396 22,568 20,546 21,422 20,888 20,432 19,453 92,989 82,195 Episodes 56,625 53,757 52,101 49,260 49,253 46,866 45,774 43,844 211,743 185,737 Average revenue per episode $ 2,989 $ 3,022 $ 2,989 $ 2,991 $ 3,023 $ 3,032 $ 3,033 $ 3,035 $ 2,998 $ 3,031 Episodic visits per episode 17.3 17.7 18.1 18.7 18.4 19.0 18.9 19.1 17.9 18.8 Total visits 1,124,268 1,101,109 1,095,225 1,070,356 1,033,502 1,001,021 967,968 937,804 4,390,958 3,940,295 Cost per visit $ 77 $ 76 $ 73 $ 75 $ 76 $ 75 $ 73 $ 73 $ 75 $ 74 Hospice: Admissions(19) 1,355 1,273 1,114 1,128 996 832 785 724 4,870 3,337 Patient days 134,113 123,491 113,028 108,717 104,183 83,628 71,277 63,431 479,350 322,519 Revenue per day $ 161 $ 159 $ 162 $ 157 $ 164 $ 157 $ 154 $ 153 $ 160 $ 158

Encompass Health 36 Share Information Refer to pages 48-50 for end notes. Weighted Average for the Period Q4 Full Year 2017 2016 2017 2016 2015 Basic shares outstanding(20) 97.6 88.6 93.7 89.1 89.4 Convertible perpetual preferred stock (21) — — — — 1.0 Convertible senior subordinated notes(20) — 8.6 4.0 8.5 8.3 Restricted stock awards, dilutive stock options, restricted stock units, and common stock warrants(22) 1.6 2.0 1.6 1.9 2.3 Diluted shares outstanding 99.2 99.2 99.3 99.5 101.0 End of Period Q4 Full Year (Millions) 2017 2016 2017 2016 2015 Basic shares outstanding(20) 97.6 88.3 97.6 88.3 89.3

Encompass Health 37 Segment Operating Results Q4 2017 Q4 2016 IRF Home Health and Hospice Reclasses Consolidated IRF Home Health and Hospice Reclasses Consolidated Net operating revenues $ 810.8 $ 208.9 $ — $ 1,019.7 $ 767.6 $ 182.3 $ — $ 949.9 Less: Provision for doubtful accounts (8.4) (1.3) — (9.7) (13.2) (1.3) — (14.5) 802.4 207.6 — 1,010.0 754.4 181.0 — 935.4 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (408.1) — (146.5) (554.6) (386.2) — (130.1) (516.3) Other operating expenses(a) (120.4) — (17.8) (138.2) (109.8) — (16.6) (126.4) Supplies (35.1) — (3.6) (38.7) (32.7) — (3.1) (35.8) Occupancy (15.6) — (3.1) (18.7) (15.2) — (2.6) (17.8) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (97.2) 97.2 — — (89.7) 89.7 — Support and overhead costs — (73.8) 73.8 — — (62.7) 62.7 — (579.2) (171.0) — (750.2) (543.9) (152.4) — (696.3) Other income 1.2 — — 1.2 0.8 — — 0.8 Equity in net income of nonconsolidated affiliates 1.7 0.1 — 1.8 2.4 0.1 — 2.5 Noncontrolling interest(b) (19.0) (2.3) — (21.3) (16.1) (0.7) — (16.8) Segment Adjusted EBITDA $ 207.1 $ 34.4 $ — 241.5 $ 197.6 $ 28.0 $ — 225.6 General and administrative expenses(c) (33.3) (26.8) Adjusted EBITDA $ 208.2 $ 198.8 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 1.3 $ — $ — $ 1.3 $ 2.0 $ (3.3) $ — $ (1.3) (b) Tax reform impact on noncontrolling interests $ 0.5 $ 4.1 $ — $ 4.6 $ — $ — $ — $ — (c) Stock-based compensation $ — $ — $ — $ 9.8 $ — $ — $ — $ 10.0 Reconciliations to GAAP provided on pages 39-47.

Encompass Health 38 Segment Operating Results Year Ended December 31, 2017 Year Ended December 31, 2016 IRF Home Health and Hospice Reclasses Consolidated IRF Home Health and Hospice Reclasses Consolidated Net operating revenues $ 3,188.1 $ 783.3 $ — $ 3,971.4 $ 3,021.1 $ 686.1 $ — $ 3,707.2 Less: Provision for doubtful accounts (46.8) (5.6) — (52.4) (57.0) (4.2) — (61.2) 3,141.3 777.7 — 3,919.0 2,964.1 681.9 — 3,646.0 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (1,603.8) — (550.8) (2,154.6) (1,493.4) — (492.5) (1,985.9) Other operating expenses(a) (462.5) — (69.6) (532.1) (431.5) — (59.9) (491.4) Supplies (135.7) — (13.6) (149.3) (128.8) — (11.2) (140.0) Occupancy (61.9) — (11.6) (73.5) (61.2) — (10.1) (71.3) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (368.4) 368.4 — — (336.5) 336.5 — Support and overhead costs — (277.2) 277.2 — — (237.2) 237.2 — (2,263.9) (645.6) — (2,909.5) (2,114.9) (573.7) — (2,688.6) Other income 4.1 — — 4.1 2.9 — — 2.9 Equity in net income of nonconsolidated affiliates 7.3 0.7 — 8.0 9.1 0.7 — 9.8 Noncontrolling interest(b) (67.6) (6.9) — (74.5) (64.0) (6.5) — (70.5) Segment Adjusted EBITDA $ 821.2 $ 125.9 $ — 947.1 $ 797.2 $ 102.4 $ — 899.6 General and administrative expenses(c) (124.0) (106.0) Adjusted EBITDA $ 823.1 $ 793.6 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 4.8 $ (0.2) $ — $ 4.6 $ 4.3 $ (3.6) $ — $ 0.7 (b) Tax reform impact on noncontrolling interests $ 0.5 $ 4.1 $ — $ 4.6 $ — $ — $ — $ — (c) Stock-based compensation $ — $ — $ — $ 47.7 $ — $ — $ — $ 27.4 Reconciliations to GAAP provided on pages 39-47.

Encompass Health 39 Reconciliation of Net Income to Adjusted EBITDA(8) 2017 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net Income $ 84.4 $ 79.4 $ 85.1 $ 86.5 $ 335.4 Loss (income) from disc ops, net of tax, attributable to Encompass Health 0.3 (0.2) 0.1 0.2 0.4 Net income attributable to noncontrolling interests (17.6) (16.4) (19.2) (25.9) (79.1) Income from continuing operations attributable to Encompass Health* 67.1 $ 0.70 62.8 $ 0.66 66.0 $ 0.67 60.8 $ 0.61 256.7 $ 2.69 Provision for income tax expense 39.7 28.6 43.1 49.2 160.6 Interest expense and amortization of debt discounts and fees 41.3 40.4 36.8 35.9 154.4 Depreciation and amortization 45.2 45.8 46.2 46.6 183.8 Loss on early extinguishment of debt — 10.4 0.3 — 10.7 Net noncash (gain) loss on disposal of assets (0.5) 0.8 3.0 1.3 4.6 Stock-based compensation expense 8.0 20.7 9.2 9.8 47.7 Tax reform impact on noncontrolling interests — — — 4.6 4.6 Adjusted EBITDA $ 200.8 $ 209.5 $ 204.6 $ 208.2 $ 823.1 Weighted average common shares outstanding: Basic 88.8 90.3 97.8 97.6 93.7 Diluted 99.0 98.9 99.0 99.2 99.3 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Refer to pages 48-50 for end notes.

Encompass Health 40 Reconciliation of Net Income to Adjusted EBITDA(8) 2016 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net Income $ 76.7 $ 81.2 $ 78.1 $ 82.1 $ 318.1 Loss (income) from disc ops, net of tax, attributable to Encompass Health 0.1 0.1 0.1 (0.3) — Net income attributable to noncontrolling interests (18.7) (18.6) (16.4) (16.8) (70.5) Income from continuing operations attributable to Encompass Health* 58.1 $ 0.61 62.7 $ 0.65 61.8 $ 0.64 65.0 $ 0.68 247.6 $ 2.59 Professional fees — acct, tax, and legal 0.2 1.7 — — 1.9 Provision for income tax expense 39.7 42.4 42.1 39.7 163.9 Interest expense and amortization of debt discounts and fees 44.6 43.4 42.5 41.6 172.1 Depreciation and amortization 42.4 42.9 43.5 43.8 172.6 Loss on early extinguishment of debt 2.4 2.4 2.6 — 7.4 Net noncash loss (gain) on disposal of assets 0.2 0.2 1.6 (1.3) 0.7 Stock-based compensation expense 4.5 8.6 4.3 10.0 27.4 Adjusted EBITDA $ 192.1 $ 204.3 $ 198.4 $ 198.8 $ 793.6 Weighted average common shares outstanding: Basic 89.5 89.3 89.1 88.6 89.1 Diluted 99.4 99.4 99.4 99.2 99.5 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Refer to pages 48-50 for end notes.

Encompass Health 41 Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q4 Full Year (In Millions) 2017 2016 2017 2016 Net cash provided by operating activities $ 151.4 $ 135.0 $ 657.2 $ 634.4 Provision for doubtful accounts (9.7) (14.5) (52.4) (61.2) Professional fees — accounting, tax, and legal — — — 1.9 Interest expense and amortization of debt discounts and fees 35.9 41.6 154.4 172.1 Equity in net income of nonconsolidated affiliates 1.8 2.5 8.0 9.8 Net income attributable to noncontrolling interests in continuing operations (25.9) (16.8) (79.1) (70.5) Amortization of debt-related items (1.0) (3.5) (8.7) (13.8) Distributions from nonconsolidated affiliates (2.0) (2.6) (8.6) (8.5) Current portion of income tax expense 24.9 17.4 85.0 31.0 Change in assets and liabilities 28.3 39.6 60.9 91.3 Net premium paid on bond transactions — — — 5.8 Tax reform impact on noncontrolling interests(2) 4.6 — 4.6 — Cash (provided by) used in operating activities of discontinued operations (0.1) 0.1 0.6 0.7 Other — — 1.2 0.6 Adjusted EBITDA $ 208.2 $ 198.8 $ 823.1 $ 793.6 Refer to pages 48-50 for end notes.

Encompass Health 42 Reconciliation of Segment Adjusted EBITDA to Income from Continuing Operations Before Income Tax Expense Three Months Ended Year Ended December 31, December 31, 2017 2016 2017 2016 (In Millions) Total segment Adjusted EBITDA $ 241.5 $ 225.6 $ 947.1 $ 899.6 General and administrative expenses (43.1) (36.8) (171.7) (133.4) Depreciation and amortization (46.6) (43.8) (183.8) (172.6) (Loss) gain on disposal of assets (1.3) 1.3 (4.6) (0.7) Professional fees — accounting, tax, and legal — — — (1.9) Loss on early extinguishment of debt — — (10.7) (7.4) Interest expense and amortization of debt discounts and fees (35.9) (41.6) (154.4) (172.1) Net income attributable to noncontrolling interests 25.9 16.8 79.1 70.5 Tax reform impact on noncontrolling interests(2) (4.6) — (4.6) — Income from continuing operations before income tax expense $ 135.9 $ 121.5 $ 496.4 $ 482.0 Refer to pages 48-50 for end notes.

Encompass Health 43 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow(7) Q4 Full Year (In Millions) 2017 2016 2017 2016 Net cash provided by operating activities $ 151.4 $ 135.0 $ 657.2 $ 634.4 Impact of discontinued operations (0.1) 0.1 0.6 0.7 Net cash provided by operating activities of continuing operations 151.3 135.1 657.8 635.1 Capital expenditures for maintenance (46.2) (39.7) (138.3) (104.2) Distributions paid to noncontrolling interests of consolidated affiliates (13.6) (15.4) (51.9) (64.9) Items non-indicative of ongoing operating performance: Cash paid for professional fees — accounting, tax, and legal — — — 1.9 Transaction costs and related assumed liabilities — — — 0.8 Net premium on bond issuance/repayment — — — 5.8 Adjusted free cash flow $ 91.5 $ 80.0 $ 467.6 $ 474.5 Cash dividends on common stock $ 24.5 $ 21.4 $ 91.5 $ 83.8 Refer to pages 48-50 for end notes.

Encompass Health 44 For the Three Months Ended December 31, 2017 Adjustments As Reported Mark-to- Market Adjustment for Stock Appreciation Rights(5) Income Tax Adjustments(6) Tax Reform Impact(2) As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 208.2 $ — $ — $ — $ 208.2 Depreciation and amortization (46.6) — — — (46.6) Interest expense and amortization of debt discounts and fees (35.9) — — — (35.9) Stock-based compensation (9.8) (0.6) — — (10.4) Loss on disposal of assets (1.3) — — — (1.3) Tax reform impact on noncontrolling interests(2) (4.6) — — 4.6 — Income from continuing operations before income tax expense 110.0 (0.6) — 4.6 114.0 Provision for income tax expense (49.2) 0.3 2.7 1.2 (45.0) Income from continuing operations attributable to Encompass Health $ 60.8 $ (0.3) $ 2.7 $ 5.8 $ 69.0 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax — — Numerator for diluted earnings per share $ 60.8 $ 69.0 Diluted earnings per share from continuing operations, as reported* $ 0.61 $ — $ 0.03 $ 0.06 $ 0.70 Diluted shares used in calculation 99.2 Adjusted EPS(4) - Q4 2017 * Adjusted EPS may not sum across due to rounding. Refer to pages 48-50 for end notes.

Encompass Health 45 For the Three Months Ended December 31, 2016 Adjustments As Reported Mark-to- Market Adjustment for Stock Appreciation Rights(5) Sale of Pediatric Home Health Assets and Hospital Income Tax Valuation and Other Adjustments As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 198.8 $ — $ — $ — $ 198.8 Depreciation and amortization (43.8) — — — (43.8) Interest expense and amortization of debt discounts and fees (41.6) — — — (41.6) Stock-based compensation (10.0) 3.0 — — (7.0) Loss on disposal of assets 1.3 — (3.3) — (2.0) Income from continuing operations before income tax expense 104.7 3.0 (3.3) — 104.4 Provision for income tax expense (39.7) (1.1) 6.1 (0.6) (35.3) Income from continuing operations attributable to Encompass Health $ 65.0 $ 1.9 $ 2.8 $ (0.6) $ 69.1 Add: Interest on convertible debt, net of tax 2.5 2.5 Numerator for diluted earnings per share $ 67.5 $ 71.6 Diluted earnings per share from continuing operations* $ 0.68 $ 0.02 $ 0.03 $ (0.01) $ 0.72 Diluted shares used in calculation 99.2 Adjusted EPS(4) - Q4 2016 * Adjusted EPS may not sum across due to rounding. Refer to pages 48-50 for end notes.

Encompass Health 46 Adjusted EPS(4) - YTD 2017 For the Year Ended December 31, 2017 Adjustments As Reported Mark-to- Market Adjustment for Stock Appreciation Rights(5) Tax Reform Impact(2) Loss on Early Extinguishment of Debt Income Tax Adjustments(6) As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 823.1 $ — $ — $ — $ — $ 823.1 Depreciation and amortization (183.8) — — — — (183.8) Loss on early extinguishment of debt(3) (10.7) — — 0.3 — (10.4) Interest expense and amortization of debt discounts and fees (154.4) — — — — (154.4) Stock-based compensation (47.7) 13.3 — — — (34.4) Loss on disposal of assets (4.6) — — — — (4.6) Tax reform impact of noncontrolling interests(2) (4.6) — 4.6 — — — Income from continuing operations before income tax expense 417.3 13.3 4.6 0.3 — 435.5 Provision for income tax expense (160.6) (5.3) 1.2 (0.1) (7.7) (172.5) Income from continuing operations attributable to Encompass Health $ 256.7 $ 8.0 $ 5.8 $ 0.2 $ (7.7) $ 263.0 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax 10.8 10.8 Numerator for diluted earnings per share $ 267.5 $ 273.8 Diluted earnings per share from continuing operations, as reported* $ 2.69 $ 0.08 $ 0.06 $ — $ (0.08) $ 2.76 Diluted shares used in calculation 99.3 * Adjusted EPS may not sum across due to rounding. Refer to pages 48-50 for end notes.

Encompass Health 47 Adjusted EPS(4) - YTD 2016 For the Year Ended December 31, 2016 Adjustments As Reported Pro. Fees — Acct., Tax, & Legal Mark-to- Market Adjustment for Stock Appreciation Rights(5) Loss on Early Exting. of Debt Sale of Pediatric Home Health Assets and Hospital Income Tax Valuation and Other Adjustments As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 793.6 $ — $ — $ — $ — $ — $ 793.6 Depreciation and amortization (172.6) — — — — — (172.6) Professional fees — accounting, tax, and legal (1.9) 1.9 — — — — — Loss on early extinguishment of debt (7.4) — — 7.4 — — — Interest expense and amortization of debt discounts and fees (172.1) — — — — — (172.1) Stock-based compensation (27.4) — 1.6 — — — (25.8) Loss on disposal of assets (0.7) — — — (4.2) — (4.9) Income from continuing operations before income tax expense 411.5 1.9 1.6 7.4 (4.2) — 418.2 Provision for income tax expense (163.9) (0.8) (0.6) (3.0) 6.5 (0.6) (162.4) Income from continuing operations attributable to Encompass Health $ 247.6 $ 1.1 $ 1.0 $ 4.4 $ 2.3 $ (0.6) $ 255.8 Add: Interest on convertible debt, net of tax 9.7 9.7 Numerator for diluted earnings per share $ 257.3 $ 265.5 Diluted earnings per share from continuing operations* $ 2.59 $ 0.01 $ 0.01 $ 0.04 $ 0.02 $ (0.01) $ 2.67 Diluted shares used in calculation 99.5 * Adjusted EPS may not sum across due to rounding. Refer to pages 48-50 for end notes.

Encompass Health 48 End Notes (1) In the first quarter of 2017, approximately $1 million associated with the TeamWorks clinical collaboration initiative was included in operating expenses within the inpatient rehabilitation segment. Total costs to the Company in 2017 for the TeamWorks clinical collaboration initiative was $5.4 million. (2) The application of the lower income tax rate that resulted from the Tax Cuts and Jobs Act to the Company’s net deferred tax assets resulted in a net $1.2 million increase in tax expense in Q4 2017. Application of the new tax rate to the Company’s joint venture entities’ deferred tax liabilities resulted in a net reduction in tax expense in Q4 2017. The Company’s joint venture partners’ share of this net tax benefit was $4.6 million, which resulted in an increase in noncontrolling interest expense in Q4 2017. (3) The interest and amortization and the loss on early extinguishment of debt related to the convertible senior subordinated notes must be added to income from continuing operations when calculating diluted earnings per share because the debt was assumed to have been converted at the beginning of the period, and the applicable shares were included in the diluted share count. (4) The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”), which is a non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to prior periods given that it excludes the impact of government, class action, and related settlements, professional fees - accounting, tax, and legal, mark-to-market adjustments for stock appreciation rights, gains or losses related to hedging instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims), items related to corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operating performance. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company's ongoing operating performance. Accordingly, they can complicate comparisons of the Company's results of operations across periods and comparisons of the Company's results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.* (5) In connection with the acquisition of Encompass Home Health & Hospice, the Company granted stock appreciation rights based on the fair value of the common stock of HealthSouth Home Health Holdings, Inc. to certain members of Encompass Home Health & Hospice management. The fair value of Holdings’ common stock is the amount by which the product of the trailing 12-month adjusted EBITDA for Holdings and the median market EBITDA multiple based on a basket of public home health companies and certain public home health acquisition transactions exceeds the initial fair value assigned to the Holdings’ stock. The fair value also takes into consideration the balance of the intercompany note in place and the net debt of Holdings. The fair value of these SARs will vary from period to period primarily based on the performance of the Company’s home health and hospice segment and the change in the median market multiple. Half of the SARs vest of January 1, 2019, and the other half vest on January 1, 2020. Once vested, they are exercisable until they expire on December 31, 2024 or in connection with termination of employment. (6) New guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” requires entities to record all of the tax effects related to share-based payment at settlement (or expiration) through the income statement. Historically, the Company recorded such tax effects to equity. * Reconciliations to GAAP provided on pages 39-47

Encompass Health 49 End Notes, con’t. (7) Definition of adjusted free cash flow, which is a non-GAAP measure, is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, dividends paid on preferred stock, distributions to noncontrolling interests, and certain other items deemed to be non-indicative of ongoing operating performance. Common stock dividends are not included in the calculation of adjusted free cash flow. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. Note: Adjusted free cash flow for prior periods has been recast to conform to the new guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The Company’s stock-based compensation plans permit shares to be withheld to pay the employee’s tax withholding obligations incurred in connection with the vesting of a stock award. The Company then remits the value of those withheld shares in cash to the applicable tax authority on the employee’s behalf. Under the new guidance, all cash payments made to taxing authorities on employees’ behalf for shares withheld should be presented as a financing activity in the statement of cash flows. Historically, the Company presented such payments as an operating activity. (8) Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a non-GAAP measure. Management and some members of the investment community utilize Adjusted EBITDA as a financial measure and the leverage ratio as a liquidity measure on an ongoing basis. These measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should be aware that in the future the Company may incur expenses similar to the adjustments set forth. (9) On July 21, 2016, the board of directors approved a $0.01 per share, or 4.3%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.24 per common share. On July 20, 2017, the board of directors approved a $0.01 per share, or 4.2%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.25 per common share. (10) The Medicare Access and CHIP Reauthorization Act of 2015 mandated a market basket update of +1.0% in 2018 for post-acute providers including rehabilitation hospitals as well as home health and hospice agencies. (11) The Bipartisan Budget Act of 2018 provides for a home health market basket update of 1.5% for CY 2020 and the elimination of any productivity adjustment to the market basket for that year. It also provides for the extension of the rural add-on adjustment through 2022, albeit declining in amount along the way. The adjustment is a reimbursement add-on for episodes in areas with a population density of six or fewer individuals per square mile. (12) The Company estimates the expected impact of each rule utilizing, among other things, the acuity of its patients over the 8-month (home health) to 12-month (inpatient rehabilitation) period prior to each rule’s release and incorporates other adjustments included in each rule. These estimates are prior to the impact of sequestration. (13) The Company acquired an additional 30% equity interest in Fairlawn Rehabilitation Hospital in Worcester, MA from its joint venture partner. This transaction increased the Company’s ownership interest from 50% to 80% and resulted in a change in accounting for this hospital from the equity method to a consolidated entity effective June 1, 2014. Adjusted Free Cash Flow As Previously Reported Payroll Taxes Paid Reclassified to Financing Activities As Currently Reported Q1 2016 $ 129.5 $ 9.9 $ 139.4 Q2 2016 115.3 — 115.3 Q3 2016 139.8 — 139.8 Q4 2016 78.3 1.7 80.0 FY 2016 $ 462.9 $ 11.6 $ 474.5 FY 2015 $ 389.0 $ 17.2 $ 406.2

Encompass Health 50 End Notes, con’t. (14) Data provided by Uniform Data System for Medical Rehabilitation, a division of UB Foundation Activities, Inc., a data gathering and analysis organization for the rehabilitation industry; represents ~70% of industry, including Encompass Health inpatient rehabilitation sites (15) Represents discharges from 126 consolidated hospitals in Q4 2017; 125 consolidated hospitals in Q3 2017; 124 consolidated hospitals in Q2 2017; 122 consolidated hospitals in Q1 2017 and Q4 2016; 121 consolidated hospitals in Q3 2016; 120 consolidated hospitals in Q2 2016; and 121 consolidated hospitals in Q1 2016 (16) Full-time equivalents included in the table represent Encompass Health employees who participate in or support the operations of our hospitals and include an estimate of full-time equivalents related to contract labor. (17) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-time equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is determined by multiplying the number of licensed beds by the Company’s occupancy percentage. (18) Represents home health admissions from 198 consolidated locations in Q4 2017; 196 consolidated locations in Q3 2017; 191 consolidated locations in Q2 2017 and Q1 2017; 186 consolidated locations in Q4 2016; 188 consolidated locations in Q3 2016; 187 consolidated locations in Q2 2016; and 184 consolidated locations in Q1 2016 (19) Represents hospice admissions from 37 locations in Q4 2017, Q3 2017 and Q2 2017; 35 locations in Q1 2017 and Q4 2016; 33 locations in Q3 2016; 29 locations in Q2 2016; and 27 locations in Q1 2016 (20) In November 2013, the Company closed separate, privately negotiated exchanges in which it issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. The Company recorded ~$249 million as debt and ~$71 million as equity. In May 2017, the Company provided notice of its intent to redeem all $320 million of outstanding convertible notes. In lieu of receiving the redemption price, the holders had the right to convert their notes into shares of the Company’s common stock at a conversion rate of 27.2221 shares per $1,000 principal amount of Notes, which rate was increased by a make-whole premium. In the aggregate, holders of $319.4 million in principal elected to convert, which resulted in the Company issuing 8,895,483 shares of common stock (approximately 8.6 million shares were previously included in the diluted share count). The remaining $0.6 million of principal was redeemed by cash payment. (21) In March 2006, the Company completed the sale of 400,000 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. In Q4 2013, the Company exchanged $320 million of newly issued 2.0% Convertible Senior Subordinated Notes due 2043 for 257,110 shares of its outstanding preferred stock. In April 2015, the Company exercised its rights to force conversion of all outstanding shares of its preferred stock. On the conversion date, each outstanding share of preferred stock was converted into 33.9905 shares of common stock, resulting in the issuance of 3,271,415 shares of common stock. (22) The agreement to settle the Company’s class action securities litigation received final court approval in January 2007. The 5.0 million shares of common stock and warrants to purchase ~8.2 million shares of common stock at a strike price of $41.40 (expired January 17, 2017) related to this settlement were issued on September 30, 2009. The 5.0 million common shares are included in the basic outstanding shares. The warrants were not included in the diluted share count prior to 2015 because the strike price had historically been above the market price. In full-year 2016, zero shares related to the warrants were included in the diluted share count due to antidilution based on the stock price. In full-year 2015, 80,814 shares related to the warrants were included in the diluted share count using the treasury stock method.