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): July 29, 2019

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.)

9001 Liberty Parkway, Birmingham, Alabama 35242

(Address of Principal Executive Offices, Including Zip Code)

(205) 967-7116

(Registrant’s Telephone Number, Including Area Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	EHC	New York Stock Exchange

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 July 29, 2019, Encompass Health Corporation (“Encompass Health” or the “Company”) issued a press release reporting the financial results of the Company for the three and six months ended June 30, 2019. 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,July 30, 2019 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 each management investor’s shares of Holdings stock may be sold prior to December 31, 2019; and all of each management investor’s shares of Holdings stock 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 one or more management investors for a cash purchase price per share equal to the fair value. In February 2018, each management investor exercised the right to sell one-third of his or her shares of Holdings stock to Encompass Health. As of June 30, 2019, the value of the outstanding shares of Holdings owned by management investors was approximately $326 million. In July 2019, Encompass Health received additional exercise notices, representing approximately 5.6% of the outstanding shares of the common stock of Holdings. Encompass Health expects to settle the acquisition of those shares upon payment of approximately $163 million in cash during the third quarter of 2019.

In conjunction with the EHHI acquisition, Encompass Health granted stock appreciation rights (“SARs”) based on Holdings common stock to certain members of EHHI management at closing. Half of the SARs vested on December 31, 2018 with the remainder vesting on December 31, 2019. Upon exercise, each SAR must be settled for cash in the amount by which the per share fair value of Holdings’ common stock on the exercise date exceeds the per share fair value on the grant date. In February 2019, members of the management team exercised a portion of their vested SARs for approximately $13 million in cash. As of June 30, 2019, the fair value of the remaining SARs was approximately $123 million. In July 2019, Encompass Health received notices to exercise the remainder of the vested SARs for approximately $55 million in cash. Encompass Health expects to make that payment during the third quarter of 2019.

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 and equity 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, 2018 (the “2018 Form 10‑K”). 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 fair value adjustments of hedging and equity instruments, 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 fair value adjustments of hedging and equity instruments and 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, or be indicative of, the Company's ongoing liquidity or operating performance. Accordingly, 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 2018 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 condensed consolidated statements of cash flows included in the Company's quarterly report on Form 10-Q for the quarterly period ended June 30, 2019 (the “June 2019 Form 10-Q”), 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 and equity 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 2018 Form 10‑K, the June 2019 Form 10-Q 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 July 29, 2019.
99.2	Supplemental information provided in connection with the second quarter 2019 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: July 29, 2019

EX-99.1

Exhibit 99.1

Media Contact	July 29, 2019
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 second quarter 2019

and updates full-year 2019 guidance

BIRMINGHAM, Ala. - Encompass Health Corp. (NYSE: EHC), a national leader in integrated healthcare, 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 second quarter ended June 30, 2019.

“Our second quarter results represent continued solid operating performance by both of our business segments and serve as further validation of our strategic positioning,” said President and Chief Executive Officer of Encompass Health Mark Tarr. “Our focus remains on delivering our value proposition of providing high-quality patient outcomes in a cost-effective manner and developing solutions for coordinating patient care across the post-acute episode.”

Consolidated results

					Growth
	Q2 2019		Q2 2018		Dollars			Percent
	(In Millions, Except per Share Data)
Net operating revenues	$	1,135.0	$	1,067.7	$	67.3		6.3	%
Income from continuing operations attributable to Encompass Health per diluted share	0.92		0.92		—			—	%
Adjusted earnings per share	1.08		0.99		0.09			9.1	%
Cash flows provided by operating activities	145.4		169.2		(23.8		)	(14.1	)%
Adjusted EBITDA	252.2		231.6		20.6			8.9	%
Adjusted free cash flow	142.2		111.2		31.0			27.9	%
	Six Months Ended June 30,
	2019		2018
Cash flows provided by operating activities	$	305.3	$	385.5	$	(80.2	)	(20.8	)%
Adjusted free cash flow	270.0		281.4		(11.4		)	(4.1	)%

Revenue growth was driven by volume and pricing growth in the inpatient rehabilitation segment and volume growth in the home health and hospice segment.

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Exhibit 99.1

Income from continuing operations attributable to Encompass Health per diluted share was flat for the second quarter of 2019 compared to the second quarter of 2018 as increased revenue and a lower effective income tax rate were offset by an increase in stock-based compensation.

The decrease in cash flows provided by operating activities and adjusted free cash flow for the six months ended June 30, 2019 resulted primarily from increased working capital.

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

Inpatient rehabilitation segment results

					Growth
	Q2 2019		Q2 2018		Dollars			Percent
Net operating revenues:	(In Millions)
Inpatient	$	851.8	$	809.6	$	42.2		5.2	%
Outpatient and other	22.1		25.0		(2.9		)	(11.6	)%
Total segment revenue	$	873.9	$	834.6	$	39.3		4.7	%
	(Actual Amounts)
Discharges	46,679		45,010		1,669			3.7	%
Same-store discharge growth								2.2	%
Net patient revenue per discharge	$	18,248	$	17,987	$	261		1.5	%
	(In Millions)
Adjusted EBITDA	$	233.9	$	223.5	$	10.4		4.7	%

• Revenue - Revenue growth resulted from volume growth and an increase in net patient revenue per discharge. Discharge growth from new stores resulted from the Company's joint ventures in Murrells Inlet, South Carolina (September 2018), Winston-Salem, North Carolina (October 2018), and Lubbock, Texas (May 2019), as well as wholly owned hospitals in Shelby County, Alabama (April 2018) and Bluffton, South Carolina (June 2018). Same-store discharge growth in the second quarter of 2019 was negatively impacted by approximately 20 basis points due to the ongoing effects of Hurricane Michael on operations in the Panama City, Florida market. Growth in net patient revenue per discharge primarily resulted from an increase in reimbursement rates from all payors and improvements in discharge destination partially offset by lower prior period cost report adjustments compared to the second quarter of 2018.

Revenue reserves related to bad debt as a percent of revenue increased 20 basis points to 1.4% in the second quarter of 2019 compared to the second quarter of 2018 primarily due to the initiation of Targeted Probe and Educate reviews at certain hospitals and a decline in collections of previously denied claims.

• Adjusted EBITDA - The increase in Adjusted EBITDA primarily resulted from revenue growth. The increase in salaries and benefits as a percent of revenue was within the Company's expected range. Other operating expenses decreased as a percent of revenue in the second quarter of 2019 due primarily to lower provider and other taxes, favorable trends in general and professional liability expense, and operating leverage resulting from revenue growth.

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Home health and hospice segment results

					Growth
	Q2 2019		Q2 2018		Dollars			Percent
Net operating revenues:	(In Millions)
Home health	$	222.7	$	204.8	$	17.9		8.7	%
Hospice	38.4		28.3		10.1			35.7	%
Total segment revenue	$	261.1	$	233.1	$	28.0		12.0	%
Home Health Metrics
(Actual Amounts)
Admissions	37,828		34,026		3,802			11.2	%
Same-store admissions growth								8.3	%
Episodes	66,881		61,238		5,643			9.2	%
Same-store episode growth								6.2	%
Revenue per episode	$	2,959	$	2,968	$	(9	)	(0.3	)%
	(In Millions)
Adjusted EBITDA	$	49.1	$	41.6	$	7.5		18.0	%

• Revenue - Revenue growth resulted from volume growth. Volume growth included the impact of the acquisition of Camellia Healthcare on May 1, 2018. Revenue per episode decreased due primarily to the timing of completed episodes and the resolution of a Zone Program Integrity Contractor audit that positively impacted pricing in the second quarter of 2018.

Hospice revenue increased primarily due to acquisitions and same-store admissions growth of 13.6%.

• Adjusted EBITDA - Growth in Adjusted EBITDA primarily resulted from revenue growth, improvements in caregiver optimization and productivity in home health, and increased scale and efficiencies in hospice.

General and administrative expenses

	Q2 2019		% of Consolidated Revenue	Q2 2018		% of Consolidated Revenue
	(In Millions)
General and administrative expenses, excluding stock-based compensation	$	30.8	2.7%	$	33.5	3.1%

• General and administrative expenses decreased as a percent of consolidated revenue primarily due to expenses associated with the Company's rebranding and name change in 2018 and operating leverage resulting from revenue growth. During the second quarter of 2019, the Company invested $0.2 million in its rebranding and name change, all of which was included in general and administrative expenses. During the second quarter of 2018, the Company invested $2.8 million in its rebranding and name change.

Balance sheet

During the second quarter of 2019, the Company redeemed $100 million of its 5.75% Senior Notes due 2024 at 101.917%.

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The Company's leverage ratio at the end of the second quarter of 2019 was 2.9x. This ratio reflected the Company's funding of the $217.5 million purchase price of Alacare Home Health and Hospice and the $48 million settlement with the United States Department of Justice (“DOJ”).

Shareholder and other distributions

During the second quarter of 2019, the Company repurchased 521,262 shares of its common stock for approximately $31 million. Year-to-date common stock repurchases for 2019 totaled 740,970 shares for approximately $44 million at an average price of $59.10 per share. As of June 30, 2019, the Company had approximately $206 million remaining under its existing stock repurchase authorization.

In the second quarter of 2019, the Company paid a quarterly cash dividend of $0.27 per share on its common stock and declared a like amount that was paid in July 2019. On July 23, 2019, the Company declared a quarterly cash dividend of $0.28 per share, which is to be paid in October 2019.

In July 2019, the Company received notice of exercise from holders of Home Health Holdings for the vested portion of their rollover shares and stock appreciation rights, which will result in cash distributions of approximately $218 million expected to be paid in the third quarter of 2019.

“The strength of our financial position was underscored in the second quarter of 2019 by our ability to address multiple funding needs with only a modest increase in financial leverage and without straining our liquidity resources,” said Executive Vice President and Chief Financial Officer of Encompass Health Doug Coltharp.

2019 guidance

Based on its results for the first half of 2019 and its current expectations for the remainder of 2019, the Company is updating its full-year guidance for 2019.

	Full-Year 2019 Guidance
	Previous Guidance	Updated Guidance
	(In Millions, Except Per Share Data)
Net operating revenues	$4,500 to $4,600	$4,500 to $4,600
Adjusted EBITDA	$925 to $945	$940 to $960
Adjusted earnings per share from continuing operations attributable to Encompass Health	$3.71 to $3.85	$3.71 to $3.85

The above guidance ranges have been updated to include:

• the Company's acquisition of Alacare Home Health and Hospice on July 1, 2019, including the resulting increase in depreciation and amortization;

• the reduction in noncontrolling interests related to the redemption of the home health rollover shares; and

• increased interest expense associated with funding the Alacare acquisition, DOJ settlement, purchase of the home health rollover shares, and exercise of the stock appreciation rights.

For additional considerations regarding the Company's 2019 guidance, 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,July 30, 2019, to discuss its results for the second quarter of 2019. For reference during the call, the Company will post certain supplemental information at http://investor.encompasshealth.com.

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The conference call may be accessed by dialing 877 587-6761 and giving the pass code 2597974. 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 integrated healthcare services, 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 includes 132 hospitals, 245 home health locations and 82 hospice locations in 37 states and Puerto Rico, the Company is committed to delivering high-quality, cost-effective integrated care across the healthcare continuum. Driven by a set of shared values, Encompass Health is ranked as one of Fortune's 100 Best Companies to Work For. For more information, visit encompasshealth.com, or follow us on Twitter and Facebook.

Other information

The information in this press release is summarized and should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the “June 2019 Form 10‑Q”), when filed, as well as the Company's Current Report on Form 8-K filed on July 29, 2019 (the “Q2 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 July 30, 2019 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, in the supplemental information, or in the Q2 Earnings Form 8-K. Readers are encouraged to review the “Note Regarding Presentation of Non-GAAP Financial Measures” included in the Q2 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 and equity 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 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 2019 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures could be reasonably predicted:

• Interest expense and amortization of debt discounts and fees - estimate of $160 million to $170 million

• Amortization of debt-related items - approximately $4 million

The Q2 Earnings Form 8-K and, when filed, the June 2019 Form 10-Q 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 Comprehensive Income

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Millions, Except per Share Data)
Net operating revenues	$	1,135.0		$	1,067.7		$	2,259.0		$	2,113.7
Operating expenses:
Salaries and benefits	622.9			578.2			1,243.7			1,148.4
Other operating expenses	149.8			149.4			299.9			290.6
Occupancy costs	20.3			19.5			39.9			38.1
Supplies	41.7			39.3			81.8			79.2
General and administrative expenses	77.1			54.9			130.5			116.0
Depreciation and amortization	52.7			49.7			105.2			95.6
Total operating expenses	964.5			891.0			1,901.0			1,767.9
Loss on early extinguishment of debt	2.3			—			2.3			—
Interest expense and amortization of debt discounts and fees	37.7			37.7			74.9			73.3
Other income	(2.2		)	(1.3		)	(5.9		)	(1.2		)
Equity in net income of nonconsolidated affiliates	(1.8		)	(2.0		)	(4.3		)	(4.3		)
Income from continuing operations before income tax expense	134.5			142.3			291.0			278.0
Provision for income tax expense	23.5			29.3			54.3			59.3
Income from continuing operations	111.0			113.0			236.7			218.7
(Loss) income from discontinued operations, net of tax	(0.1		)	0.2			(0.6		)	(0.3		)
Net and comprehensive income	110.9			113.2			236.1			218.4
Less: Net and comprehensive income attributable to noncontrolling interests	(19.7		)	(21.4		)	(42.6		)	(42.8		)
Net and comprehensive income attributable to Encompass Health	$	91.2		$	91.8		$	193.5		$	175.6
Weighted average common shares outstanding:
Basic	98.0			97.9			98.2			97.9
Diluted	99.3			99.6			99.5			99.6
Earnings per common share:
Basic earnings per share attributable to Encompass Health common shareholders:
Continuing operations	$	0.93		$	0.93		$	1.97		$	1.79
Discontinued operations	—			—			(0.01		)	—
Net income	$	0.93		$	0.93		$	1.96		$	1.79
Diluted earnings per share attributable to Encompass Health common shareholders:
Continuing operations	$	0.92		$	0.92		$	1.95		$	1.76
Discontinued operations	—			—			(0.01		)	—
Net income	$	0.92		$	0.92		$	1.94		$	1.76
Amounts attributable to Encompass Health common shareholders:
Income from continuing operations	$	91.3		$	91.6		$	194.1		$	175.9
(Loss) income from discontinued operations, net of tax	(0.1		)	0.2			(0.6		)	(0.3		)
Net income attributable to Encompass Health	$	91.2		$	91.8		$	193.5		$	175.6

6

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30, 2019		December 31, 2018
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	221.7	$	69.2
Restricted cash	56.8		59.0
Accounts receivable	496.0		467.7
Other current assets	70.4		66.2
Total current assets	844.9		662.1
Property and equipment, net	1,788.1		1,634.8
Operating lease right-of-use assets	284.4		—
Goodwill	2,111.6		2,100.8
Intangible assets, net	443.6		443.4
Deferred income tax assets	42.6		42.9
Other long-term assets	296.9		291.0
Total assets	$	5,812.1	$	5,175.0
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	38.1	$	35.8
Current operating lease liabilities	45.2		—
Accounts payable	95.6		90.0
Accrued expenses and other current liabilities	574.0		546.7
Total current liabilities	752.9		672.5
Long-term debt, net of current portion	2,719.6		2,478.6
Long-term operating lease liabilities	245.8		—
Other long-term liabilities	157.2		205.2
	3,875.5		3,356.3
Commitments and contingencies
Redeemable noncontrolling interests	352.8		261.7
Shareholders’ equity:
Encompass Health shareholders’ equity	1,275.9		1,276.7
Noncontrolling interests	307.9		280.3
Total shareholders’ equity	1,583.8		1,557.0
Total liabilities and shareholders’ equity	$	5,812.1	$	5,175.0

7

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2019			2018
	(In Millions)
Cash flows from operating activities:
Net income	$	236.1		$	218.4
Loss from discontinued operations, net of tax	0.6			0.3
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization	105.2			95.6
Stock-based compensation	65.3			47.5
Deferred tax expense (benefit)	0.5			(3.6		)
Other, net	3.8			5.6
Change in assets and liabilities, net of acquisitions—
Accounts receivable	(22.6		)	9.9
Other assets	(11.8		)	11.4
Accounts payable	(4.5		)	(0.4		)
Accrued payroll	(7.7		)	(10.6		)
Other liabilities	(55.1		)	12.0
Net cash used in operating activities of discontinued operations	(4.5		)	(0.6		)
Total adjustments	68.6			166.8
Net cash provided by operating activities	305.3			385.5
Cash flows from investing activities:
Purchases of property and equipment	(155.8		)	(108.8		)
Additions to capitalized software costs	(6.6		)	(9.7		)
Acquisitions of businesses, net of cash acquired	(13.7		)	(135.8		)
Other, net	(15.5		)	(6.7		)
Net cash used in investing activities	(191.6		)	(261.0		)

(Continued) 8

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
	(In Millions)
Cash flows from financing activities:
Principal payments on debt, including pre-payments	(112.1		)	(9.1		)
Borrowings on revolving credit facility	400.0			245.0
Payments on revolving credit facility	(95.0		)	(190.0		)
Principal payments under finance lease obligations	(9.3		)	(8.4		)
Repurchases of common stock, including fees and expenses	(43.8		)	—
Dividends paid on common stock	(54.9		)	(49.9		)
Purchase of equity interests in consolidated affiliates	—			(65.1		)
Distributions paid to noncontrolling interests of consolidated affiliates	(36.5		)	(35.2		)
Taxes paid on behalf of employees for shares withheld	(16.1		)	(8.3		)
Other, net	8.2			4.5
Net cash provided by (used in) financing activities	40.5			(116.5		)
Increase in cash, cash equivalents, and restricted cash	154.2			8.0
Cash, cash equivalents, and restricted cash at beginning of period	133.5			116.8
Cash, cash equivalents, and restricted cash at end of period	$	287.7		$	124.8
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents at beginning of period	$	69.2		$	54.4
Restricted cash at beginning of period	59.0			62.4
Restricted cash included in other long-term assets at beginning of period	5.3			—
Cash, cash equivalents, and restricted cash at beginning of period	$	133.5		$	116.8
Cash and cash equivalents at end of period	$	221.7		$	59.0
Restricted cash at end of period	56.8			65.8
Restricted cash included in other long-term assets at end of period	9.2			—
Cash, cash equivalents, and restricted cash at end of period	$	287.7		$	124.8

9

Encompass Health Corporation and Subsidiaries

Supplemental Information

Earnings Per Share

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Millions, Except Per Share Data)
Consolidated Adjusted EBITDA	$	252.2		$	231.6		$	495.1		$	454.9
Depreciation and amortization	(52.7		)	(49.7		)	(105.2		)	(95.6		)
Interest expense and amortization of debt discounts and fees	(37.7		)	(37.7		)	(74.9		)	(73.3		)
Stock-based compensation expense	(45.9		)	(21.4		)	(65.3		)	(47.5		)
Noncash loss on disposal of assets	(1.3		)	(2.4		)	(2.4		)	(3.2		)
	114.6			120.4			247.3			235.3
Certain items non-indicative of ongoing operating performance:
Loss on early extinguishment of debt	(2.3		)	—			(2.3		)	—
Transaction costs	(0.4		)	—			(1.0		)	(1.0		)
SARs mark-to-market impact on noncontrolling interests	2.6			0.9			3.4			1.9
Change in fair market value of equity securities	0.3			(0.4		)	1.2			(1.0		)
Payroll taxes on SARs exercise	—			—			(0.2		)	—
Pre-tax income	114.8			120.9			248.4			235.2
Income tax expense	(23.5		)	(29.3		)	(54.3		)	(59.3		)
Income from continuing operations (1)	$	91.3		$	91.6		$	194.1		$	175.9
Basic shares	98.0			97.9			98.2			97.9
Diluted shares	99.3			99.6			99.5			99.6
Basic earnings per share (1)	$	0.93		$	0.93		$	1.97		$	1.79
Diluted earnings per share (1)	$	0.92		$	0.92		$	1.95		$	1.76

⁽¹⁾  Income from continuing operations attributable to Encompass Health

10

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	Q2						6 Months
	2019			2018			2019			2018
Earnings per share, as reported	$	0.92		$	0.92		$	1.95		$	1.76
Adjustments, net of tax:
Mark-to-market adjustments for stock appreciation rights	0.21			0.07			0.28			0.15
Transaction costs	—			—			0.01			0.01
Loss on early extinguishment of debt	0.02			—			0.02			—
Change in fair market value of equity securities	—			—			(0.01		)	0.01
Income tax adjustments	(0.07		)	(0.01		)	(0.12		)	(0.01		)
Adjusted earnings per share(1)	$	1.08		$	0.99		$	2.12		$	1.92

⁽¹⁾  Adjusted EPS may not sum due to rounding.

11

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Three Months Ended June 30, 2019
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Compensation Expense			Loss on Early Exting. of Debt			Income Tax Adjustments			Transaction Costs			Change in Fair Market Value of Equity Securities			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA(1)	$	252.2		$	—		$	—		$	—		$	—		$	—		$	252.2
Depreciation and amortization	(52.7		)	—			—			—			—			—			(52.7		)
Loss on early extinguishment of debt	(2.3		)	—			2.3			—			—			—			—
Interest expense and amortization of debt discounts and fees	(37.7		)	—			—			—			—			—			(37.7		)
Stock-based compensation	(45.9		)	31.4			—			—			—			—			(14.5		)
Loss on disposal of assets	(1.3		)	—			—			—			—			—			(1.3		)
Transaction costs	(0.4		)	—			—			—			0.4			—			—
SARs mark-to-market impact on noncontrolling interests	2.6			(2.6		)	—			—			—			—			—
Change in fair market value of equity securities	0.3			—			—			—			—			(0.3		)	—
Income from continuing operations before income tax expense	114.8			28.8			2.3			—			0.4			(0.3		)	146.0
Provision for income tax expense	(23.5		)	(7.8		)	(0.6		)	(7.2		)	(0.1		)	0.1			(39.1		)
Income from continuing operations attributable to Encompass Health	$	91.3		$	21.0		$	1.7		$	(7.2	)	$	0.3		$	(0.2	)	$	106.9
Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax	—																		—
Numerator for diluted earnings per share	$	91.3																	$	106.9
Diluted earnings per share from continuing operations(2)	$	0.92		$	0.21		$	0.02		$	(0.07	)	$	—		$	—		$	1.08
Diluted shares used in calculation	99.3

⁽¹⁾  Reconciliation to GAAP provided on page 17

⁽²⁾  Adjusted EPS may not sum across due to rounding.

12

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Three Months Ended June 30, 2018
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Compensation Expense			Income Tax Adjustments			Change in Fair Market Value of Equity Securities			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA(1)	$	231.6		$	—		$	—		$	—		$	231.6
Depreciation and amortization	(49.7		)	—			—			—			(49.7		)
Interest expense and amortization of debt discounts and fees	(37.7		)	—			—			—			(37.7		)
Stock-based compensation	(21.4		)	10.8			—			—			(10.6		)
Loss on disposal of assets	(2.4		)	—			—			—			(2.4		)
SARs mark-to-market impact on noncontrolling interests	0.9			(0.9		)	—			—			—
Change in fair market value of equity securities	(0.4		)	—			—			0.4			—
Income from continuing operations before income tax expense	120.9			9.9			—			0.4			131.2
Provision for income tax expense	(29.3		)	(2.8		)	(0.6		)	(0.1		)	(32.8		)
Income from continuing operations attributable to Encompass Health	$	91.6		$	7.1		$	(0.6	)	$	0.3		$	98.4
Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax	—												—
Numerator for diluted earnings per share	$	91.6											$	98.4
Diluted earnings per share from continuing operations(2)	$	0.92		$	0.07		$	(0.01	)	$	—		$	0.99
Diluted shares used in calculation	99.6

⁽¹⁾  Reconciliation to GAAP provided on page 17

⁽²⁾  Adjusted EPS may not sum across due to rounding.

13

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Six Months Ended June 30, 2019
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Compensation Expense			Loss on Early Exting. of Debt			Income Tax Adjustments			Transaction Costs			Change in Fair Market Value of Equity Securities			Payroll Taxes on SARs Exercise		As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA(1)	$	495.1		$	—		$	—		$	—		$	—		$	—		$	—	$	495.1
Depreciation and amortization	(105.2		)	—			—			—			—			—			—		(105.2		)
Loss on early extinguishment of debt	(2.3		)	—			2.3			—			—			—			—		—
Interest expense and amortization of debt discounts and fees	(74.9		)	—			—			—			—			—			—		(74.9		)
Stock-based compensation	(65.3		)	41.0			—			—			—			—			—		(24.3		)
Loss on disposal of assets	(2.4		)	—			—			—			—			—			—		(2.4		)
Transaction costs	(1.0		)	—			—			—			1.0			—			—		—
SARs mark-to-market impact on noncontrolling interests	3.4			(3.4		)	—			—			—			—			—		—
Change in fair market value of equity securities	1.2			—			—			—			—			(1.2		)	—		—
Payroll taxes on SARs exercise	(0.2		)	—			—			—			—			—			0.2		—
Income from continuing operations before income tax expense	248.4			37.6			2.3			—			1.0			(1.2		)	0.2		288.3
Provision for income tax expense	(54.3		)	(10.2		)	(0.6		)	(12.4		)	(0.3		)	0.3			—		(77.5		)
Income from continuing operations attributable to Encompass Health	$	194.1		$	27.4		$	1.7		$	(12.4	)	$	0.7		$	(0.9	)	$	0.2	$	210.8
Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax	—																				—
Numerator for diluted earnings per share	$	194.1																			$	210.8
Diluted earnings per share from continuing operations(2)	$	1.95		$	0.28		$	0.02		$	(0.12	)	$	0.01		$	(0.01	)	$	—	$	2.12
Diluted shares used in calculation	99.5

⁽¹⁾  Reconciliation to GAAP provided on page 17

⁽²⁾  Adjusted EPS may not sum across due to rounding.

14

Encompass Health Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Six Months Ended June 30, 2018
				Adjustments
	As Reported			Mark-to-Market Adjustment for Stock Compensation Expense			Income Tax Adjustments			Transaction Costs			Change in Fair Market Value of Equity Securities			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA(1)	$	454.9		$	—		$	—		$	—		$	—		$	454.9
Depreciation and amortization	(95.6		)	—			—			—			—			(95.6		)
Interest expense and amortization of debt discounts and fees	(73.3		)	—			—			—			—			(73.3		)
Stock-based compensation	(47.5		)	22.4			—			—			—			(25.1		)
Loss on disposal of assets	(3.2		)	—			—			—			—			(3.2		)
Transaction costs	(1.0		)	—			—			1.0			—			—
SARs mark-to-market impact on noncontrolling interests	1.9			(1.9		)	—			—			—			—
Change in fair market value of equity securities	(1.0		)	—			—			—			1.0			—
Income from continuing operations before income tax expense	235.2			20.5			—			1.0			1.0			257.7
Provision for income tax expense	(59.3		)	(5.7		)	(0.7		)	(0.3		)	(0.3		)	(66.3		)
Income from continuing operations attributable to Encompass Health	$	175.9		$	14.8		$	(0.7	)	$	0.7		$	0.7		$	191.4
Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax	—															—
Numerator for diluted earnings per share	$	175.9														$	191.4
Diluted earnings per share from continuing operations(2)	$	1.76		$	0.15		$	(0.01	)	$	0.01		$	0.01		$	1.92
Diluted shares used in calculation	99.6

⁽¹⁾  Reconciliation to GAAP provided on page 17

⁽²⁾  Adjusted EPS may not sum across due to rounding.

15

Encompass Health Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Income to Adjusted EBITDA

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Millions)
Net income	$	110.9		$	113.2		$	236.1		$	218.4
Loss (income) from discontinued operations, net of tax, attributable to Encompass Health	0.1			(0.2		)	0.6			0.3
Net income attributable to noncontrolling interests	(19.7		)	(21.4		)	(42.6		)	(42.8		)
Provision for income tax expense	23.5			29.3			54.3			59.3
Interest expense and amortization of debt discounts and fees	37.7			37.7			74.9			73.3
Depreciation and amortization	52.7			49.7			105.2			95.6
Loss on early extinguishment of debt	2.3			—			2.3			—
Net noncash loss on disposal of assets	1.3			2.4			2.4			3.2
Stock-based compensation expense	45.9			21.4			65.3			47.5
Transaction costs	0.4			—			1.0			1.0
SARs mark-to-market impact on noncontrolling interests	(2.6		)	(0.9		)	(3.4		)	(1.9		)
Change in fair market value of equity securities	(0.3		)	0.4			(1.2		)	1.0
Payroll taxes on SARs exercise	—			—			0.2			—
Adjusted EBITDA	$	252.2		$	231.6		$	495.1		$	454.9

Reconciliation of Segment Adjusted EBITDA to

Income from Continuing Operations Before Income Tax Expense

	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
	2019			2018			2019			2018			2018
	(In Millions)
Total segment Adjusted EBITDA	$	283.0		$	265.1		$	559.3		$	522.4		$	1,034.3
General and administrative expenses	(77.1		)	(54.9		)	(130.5		)	(116.0		)	(220.2		)
Depreciation and amortization	(52.7		)	(49.7		)	(105.2		)	(95.6		)	(199.7		)
Loss on disposal of assets	(1.3		)	(2.4		)	(2.4		)	(3.2		)	(5.7		)
Government, class action, and related settlements	—			—			—			—			(52.0		)
Loss on early extinguishment of debt	(2.3		)	—			(2.3		)	—			—
Interest expense and amortization of debt discounts and fees	(37.7		)	(37.7		)	(74.9		)	(73.3		)	(147.3		)
Net income attributable to noncontrolling interests	19.7			21.4			42.6			42.8			83.1
SARs mark-to-market impact on noncontrolling interests	2.6			0.9			3.4			1.9			2.6
Change in fair market value of equity securities	0.3			(0.4		)	1.2			(1.0		)	(1.9		)
Payroll taxes on SARs exercise	—			—			(0.2		)	—			—
Income from continuing operations before income tax expense	$	134.5		$	142.3		$	291.0		$	278.0		$	493.2

16

Encompass Health Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
	2019			2018			2019			2018			2018
	(In Millions)
Net cash provided by operating activities	$	145.4		$	169.2		$	305.3		$	385.5		$	762.4
Interest expense and amortization of debt discounts and fees	37.7			37.7			74.9			73.3			147.3
Equity in net income of nonconsolidated affiliates	1.8			2.0			4.3			4.3			8.7
Net income attributable to noncontrolling interests in continuing operations	(19.7		)	(21.4		)	(42.6		)	(42.8		)	(83.1		)
Amortization of debt-related items	(1.0		)	(1.0		)	(2.0		)	(2.0		)	(4.0		)
Distributions from nonconsolidated affiliates	(2.5		)	(2.3		)	(4.6		)	(3.5		)	(8.3		)
Current portion of income tax expense	25.5			29.9			53.7			62.9			128.0
Change in assets and liabilities	65.2			18.4			101.7			(22.3		)	(46.0		)
Cash used in (provided by) operating activities of discontinued operations	1.5			(0.1		)	4.5			0.6			(0.8		)
Transaction costs	0.4			—			1.0			1.0			1.0
SARs mark-to-market impact on noncontrolling interests	(2.6		)	(0.9		)	(3.4		)	(1.9		)	(2.6		)
Payroll taxes on SARs exercise	—			—			0.2			—			—
Change in fair market value of equity securities	(0.3		)	0.4			(1.2		)	1.0			1.9
Other	0.8			(0.3		)	3.3			(1.2		)	(3.5		)
Consolidated Adjusted EBITDA	$	252.2		$	231.6		$	495.1		$	454.9		$	901.0

17

Encompass Health Corporation and Subsidiaries

Supplemental Information

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Millions)
Net cash provided by operating activities	$	145.4		$	169.2		$	305.3		$	385.5
Impact of discontinued operations	1.5			(0.1		)	4.5			0.6
Net cash provided by operating activities of continuing operations	146.9			169.1			309.8			386.1
Capital expenditures for maintenance	(34.5		)	(36.0		)	(64.1		)	(72.1		)
Distributions paid to noncontrolling interests of consolidated affiliates	(17.0		)	(19.8		)	(36.5		)	(35.2		)
Items non-indicative of ongoing operations:
Transaction costs and related assumed liabilities	0.4			(2.1		)	1.0			(1.7		)
Cash paid for SARs exercise	—			—			13.4			4.3
Cash paid for government, class action, and related settlements	46.4			—			46.4			—
Adjusted free cash flow	$	142.2		$	111.2		$	270.0		$	281.4

For the three months ended June 30, 2019, net cash used in investing activities was $100.1 million and primarily resulted from capital expenditures. Net cash provided by financing activities during the three months ended June 30, 2019 was $122.2 million and primarily resulted from borrowings on the Company's revolving credit facility to fund the acquisition of Alacare Home Health and Hospice and other operational needs.

For the three months ended June 30, 2018,net cash used in investing activities was $200.4 million and primarily resulted from the acquisition of Camellia Healthcare and capital expenditures. Net cash provided by financing activities during the three months endedJune 30, 2018 was $0.2 million and primarily resulted from net borrowings on debt primarily associated with the acquisition of Camellia Healthcare offset by cash dividends paid on common stock and distributions paid to noncontrolling interests of consolidated affiliates.

For the six months ended June 30, 2019, net cash used in investing activities was $191.6 million and primarily resulted from capital expenditures. Net cash provided by financing activities during the six months ended June 30, 2019 was $40.5 million and primarily resulted from borrowings on the Company's revolving credit facility to fund the acquisition of Alacare Home Health and Hospice and other operational needs.

For the six months ended June 30, 2018, net cash used in investing activities was $261.0 million and primarily resulted from the acquisition of Camellia Healthcare and capital expenditures. Net cash used in financing activities during the six months ended June 30, 2018 was $116.5 million and primarily resulted from purchasing one-third of the Rollover Shares held by members of the home health and hospice management team, cash dividends paid on common stock, and distributions paid to noncontrolling interests of consolidated affiliates offset by net borrowings on debt primarily associated with the acquisition of Camellia Healthcare.

18

Encompass Health Corporation and Subsidiaries

Forward-Looking Statements

Statements contained in this press release and the supplemental information 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, its 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 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; increases in Medicare audit activity, including increased use of sampling and extrapolation, resulting in additional unpaid reimbursement claims and an increase in the backlog of appealed claims denials; 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 (such as the patient driven groupings model and other payment system reforms); 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 value-based purchasing and 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 instability or uncertainty related to armed conflict or an act of terrorism, governmental impasse over approval of the United States federal budget, an increase in the debt ceiling, or an international sovereign debt crisis; 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, 2018 and Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, when filed.

19

EX-99.2

Second Quarter 2019 Earnings Call July 30, 2019 Supplemental information

Forward-looking statements 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 earnings release attached as Exhibit 99.1 to the Company’s Form 8-K dated July 29, 2019 (the “Q2 Earnings Release Form 8-K”), the Form 10-K for the year ended Dec. 31, 2018, the Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, 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 Q2 Earnings Release Form 8-K, 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 supplemental information. Encompass Health 2

Table of contents Q2 2019 summary.................................................................................................... 4-5 Clinical collaboration rate ......................................................................................... 6 Inpatient rehabilitation segment ................................................................................. 7-8 Home health & hospice segment.................................................................................. 9-10 Consolidated Adjusted EBITDA..................................................................................... 11 Earnings per share................................................................................................... 12-13 Adjusted free cash flow ............................................................................................ 14 Guidance.............................................................................................................. 15-16 Free cash flow assumptions and uses............................................................................. 17-18 Overview of rollover shares and SARs ............................................................................ 19 Appendix Map of locations ..................................................................................................... 21 Rebranding and name change ..................................................................................... 22 Expansion activity ................................................................................................... 23 Pre-payment claims denials - inpatient rehabilitation segment ............................................. 24 Business outlook ..................................................................................................... 25-27 Debt schedule and maturity profile .............................................................................. 28-29 New-store/same-store growth..................................................................................... 30-31 Payment sources (percent of revenues) ......................................................................... 32 Inpatient rehabilitation operational and labor metrics ....................................................... 33 Home health & hospice operational metrics .................................................................... 34 Share information ................................................................................................... 35 Segment operating results ......................................................................................... 36-38 Reconciliations to GAAP ............................................................................................ 39-47 End notes ............................................................................................................. 48-49 Encompass Health 3

Q2 2019 summary Q2 Growth ($millions) Q2 2019 Q2 2018 Dollars Percent Encompass Health Consolidated Net operating revenues $ 1,135.0 $ 1,067.7 $ 67.3 6.3% Adjusted EBITDA $ 252.2 $ 231.6 $ 20.6 8.9% Inpatient Rehabilitation Segment Net operating revenues $ 873.9 $ 834.6 $ 39.3 4.7% Adjusted EBITDA $ 233.9 $ 223.5 $ 10.4 4.7% Home Health and Hospice Segment Net operating revenues $ 261.1 $ 233.1 $ 28.0 12.0% Adjusted EBITDA $ 49.1 $ 41.6 $ 7.5 18.0% Major takeaways: u Strong revenue growth Ÿ Inpatient rehabilitation segment ü Discharge growth of 3.7%; same store = 2.2% ü Net revenue per discharge increase of 1.5% Ÿ Home health and hospice segment ü Admissions growth of 11.2%; same store = 8.3% ü Revenue per episode decrease of 0.3% u Consolidated Adjusted EBITDA increased 8.9% to $252.2 million. u Adjusted EPS of $1.08 per diluted share increased 9.1% - see pages 12 and 13. u Year-to-date adjusted free cash flow of $270.0 million - see page 14. Encompass Health Reconciliations to GAAP provided on pages 39-47 4

Q2 2019 summary (cont.) u Expansion activity (see page 23) Ÿ Began operating a new 40-bed inpatient rehabilitation hospital in Lubbock, Texas in May 2019, a joint venture with University Medical Center Health System Ÿ Added 81 beds to existing hospitals Ÿ Opened new home health location in South Carolina Ÿ Acquired Alacare Home Health and Hospice on July 1, 2019 ü 23 home health locations and 23 hospice locations in Alabama ü $217.5 million cash purchase price funded with cash on hand and borrowings under revolving credit facility ü Three new IRF overlap markets ü Income tax benefit with an estimated present value of ~$30 million u Balance sheet Ÿ Leverage ratio of 2.9x at end of second quarter ü Included funding for Alacare acquisition and DOJ settlement(1) Ÿ Redeemed $100 million of 5.75% Senior Notes due 2024 at 101.917% in June 2019 u Shareholder and other distributions Ÿ Repurchased 521,262 shares of common stock for ~$31 million(2) ü Year-to-date repurchases of 740,970 shares of common stock for ~$44 million(2) Ÿ Paid quarterly cash dividend of $0.27 per share in April 2019 Ÿ Declared a $0.27 per share quarterly cash dividend in May 2019 (paid in July 2019) Ÿ Declared a $0.28 per share quarterly cash dividend in July 2019 (to be paid in October 2019) Ÿ Received notice of exercise from holders of Home Health Holdings in July 2019 for the vested portion of their rollover shares and SARs which will result in cash distributions of ~$218 million expected to be paid in Q3 2019 (see page 19). Encompass Health Refer to pages 48-49 for end notes. 5

The Company continues to improve the patient experience and outcomes through integrated care delivery. Inpatient rehabilitation–home health clinical collaboration (all payors) overlap markets* 34.9% 33.2% Collaboration rate Collaboration rate u As of June 30, 2019, Encompass Health had 83 overlap markets.* u The clinical collaboration rate with Encompass 5,871 5,219 Health’s inpatient rehabilitation hospitals increased 170 basis points in Q2 2019 compared to Q2 2018. u The clinical collaboration rate objective is 40% in the near term. u The objectives of clinical collaboration are to improve the patient experience and outcomes and to reduce the total cost of care across a post-acute episode. 10,486 10,955 Ÿ Coordination between our IRFs and home health teams is resulting in lower discharges to skilled nursing facilities, higher discharges to home and improved patient satisfaction. Q2 2018 Q2 2019 Encompass Health home Encompass health Health IRF discharges to: Non-Encompass Health home health * Overlap markets have an Encompass Health IRF and an Encompass Health home health location within an Encompass Health approximate 30-mile radius, excluding markets that have home health licensure barriers. Overlap 6 markets are open for 12 months before inclusion in the clinical collaboration rate.

Inpatient rehabilitation segment - revenue Q2 Q2 Favorable/ ($millions) 2019 2018 (Unfavorable) Net operating revenues: Inpatient $ 851.8 $ 809.6 5.2% Outpatient and other 22.1 25.0 (11.6%) Total segment revenue $ 873.9 $ 834.6 4.7% (Actual Amounts) Discharges 46,679 45,010 3.7% Same-store discharge growth 2.2% Net patient revenue per discharge $ 18,248 $ 17,987 1.5% Revenue reserves related to bad debt as a percent of revenue 1.4% 1.2% 20 basis points u Revenue growth was driven by volume and pricing growth. Ÿ New-store discharge growth resulted from joint ventures in Murrells Inlet, SC (September 2018), Winston-Salem, NC (October 2018), and Lubbock, TX (May 2019) and wholly owned hospitals in Shelby County, AL (April 2018) and Bluffton, SC (June 2018). Ÿ Same-store discharge growth in Q2 2019 was negatively impacted by ~20 basis points due to the ongoing effects of Hurricane Michael on operations in the Panama City, Florida market. Ÿ Growth in net patient revenue per discharge primarily resulted from an increase in reimbursement rates from all payors and improvements in discharge destination partially offset by lower prior period cost report adjustments compared to Q2 2018. u Revenue reserves related to bad debt as a percent of revenue increased 20 basis points to 1.4% primarily due to the initiation of Targeted Probe and Educate, or TPE, reviews at certain hospitals and a decline in collections of previously denied claims (see page 24). Encompass Health 7

Inpatient rehabilitation segment - Adjusted EBITDA u Segment Adjusted EBITDA for the quarter of $233.9 million. • All expense ratios were Q2 Q2 negatively impacted by an % of % of ($millions) 2019 Revenue 2018 Revenue increase in revenue reserves related to bad debt (see page 7) Net operating revenues $ 873.9 $ 834.6 and a decrease in prior period Operating expenses: cost report adjustments. Salaries and benefits (443.6) 50.8% (416.5) 49.9% • The increase in salaries and benefits as a percent of revenue (a) was within the Company’s Other operating expenses (127.2) 14.6% (126.9) 15.2% expected range. Supplies (36.7) 4.2% (34.7) 4.2% ü Salaries and benefits in Q2 Occupancy costs (16.3) 1.9% (16.0) 1.9% 2019 were impacted by: Hospital operating expenses (180.2) 20.6% (177.6) 21.3% § higher salaries and wages (b) per full-time equivalent and Other income 1.9 1.2 an increase in group medical Equity in nonconsolidated affiliates 1.4 1.6 expense Noncontrolling interests (19.5) (19.8) § partially offset by a Segment Adjusted EBITDA $ 233.9 $ 223.5 reduction in workers’ compensation expense. Percent change 4.7% • Other operating expenses In arriving at Adjusted EBITDA, the following were excluded: decreased as a percent of revenue in the second quarter of (a) Loss on disposal of assets $ 1.4 $ 2.4 2019 due primarily to lower (b) Change in fair market value of equity securities $ (0.3) $ 0.4 provider and other taxes, favorable trends in general and professional liability expense, and operating leverage resulting from revenue growth. Encompass Health Reconciliations to GAAP provided on pages 39-47 8

Home health and hospice segment - revenue Q2 Q2 Favorable/ ($millions) 2019 2018 (Unfavorable) Net operating revenues: Home health revenue $ 222.7 $ 204.8 8.7 % Hospice revenue 38.4 28.3 35.7 % Total segment revenue $ 261.1 $ 233.1 12.0 % Home Health Metrics (Actual Amounts) Admissions 37,828 34,026 11.2 % Same-store admissions growth 8.3 % Episodes 66,881 61,238 9.2 % Same-store episode growth 6.2 % Revenue per episode $ 2,959 $ 2,968 (0.3)% u Revenue growth was driven by volume growth. Ÿ New-store admissions growth included the acquisition of Camellia Healthcare on May 1, 2018. u Revenue per episode decreased 0.3% due primarily to the timing of completed episodes and the resolution of a Zone Program Integrity Contractor audit that positively impacted pricing in Q2 2018. u Hospice revenue increased primarily due to acquisitions and same-store admissions growth of 13.6%. Encompass Health 9

Home health and hospice segment - Adjusted EBITDA u Segment Adjusted EBITDA for the quarter of $49.1 Q2 Q2 % of % of million. ($millions) 2019 Revenue 2018 Revenue Ÿ Included the acquisition of Net operating revenues $ 261.1 $ 233.1 Camellia Healthcare which closed on May 1, 2018 Ÿ Cost of services (119.9) 45.9% (109.1) 46.8% Cost of services as a Support and overhead costs(a) (89.7) 34.4% (80.8) 34.7% percent of revenue decreased primarily due Operating expenses (209.6) 80.3% (189.9) 81.5% to: üimprovements in Other income — 0.5 caregiver optimization Equity in net income of nonconsolidated affiliates 0.4 0.4 and productivity in home Noncontrolling interests(b) (2.8) (2.5) health and ü Segment Adjusted EBITDA $ 49.1 $ 41.6 increased scale and efficiencies in hospice. Percent change 18.0% Ÿ Support and overhead costs as a percent of In arriving at Adjusted EBITDA, the following were excluded: revenue decreased (a) primarily due to favorable Gain on disposal of assets $ (0.1) $ — group medical expense and (b) SARs mark-to-market impact on noncontrolling operating leverage interests (see page 19) $ (2.6) $ (0.9) resulting from revenue growth. Encompass Health Reconciliations to GAAP provided on pages 39-47 10

Consolidated Adjusted EBITDA Consolidated Adjusted EBITDA for the quarter of $252.2 million u General and administrative expenses decreased as a percent of consolidated revenue primarily due to expenses associated with the Company’s rebranding and name change in 2018 and operating leverage resulting from revenue growth. % of Consolidated % of Consolidated ($millions) Q2 2019 Revenue Q2 2018 Revenue Inpatient rehabilitation segment Adjusted EBITDA $ 233.9 $ 223.5 Home health and hospice segment Adjusted EBITDA 49.1 41.6 General and administrative expenses* (30.8) 2.7% (33.5) 3.1% Consolidated Adjusted EBITDA $ 252.2 $ 231.6 Percentage change 8.9% General and Administrative Expenses Associated with Rebranding and Name Change ($millions) Q1 Q2 Q3 Q4 Year to Date 2019 $ 0.8 $ 0.2 TBD TBD $ 1.0 2018 3.6 2.8 1.9 2.6 10.9 2017 0.5 1.7 1.5 2.5 6.2 See rebranding and name change information on page 22. * General and administrative expenses in the above table exclude stock compensation of $45.9 million and $21.4 million for the second quarter Encompass Health of 2019 and 2018, respectively, as well as $0.4 million in transaction costs for the second quarter of 2019. 11 . Reconciliations to GAAP provided on pages 39-47

Earnings per share - as reported u Reported earnings per diluted share for both periods in 2019 compared to the Q2 6 Months same periods of 2018 reflect an increase (In Millions, Except Per Share Data) 2019 2018 2019 2018 in Adjusted EBITDA and a lower effective Consolidated Adjusted EBITDA $ 252.2 $ 231.6 $ 495.1 $ 454.9 tax rate offset by an increase in stock- Depreciation and amortization (52.7) (49.7) (105.2) (95.6) based compensation. Interest expense and amortization of u debt discounts and fees (37.7) (37.7) (74.9) (73.3) Higher depreciation and amortization Stock-based compensation expense (45.9) (21.4) (65.3) (47.5) resulted from capital investments. u Noncash loss on disposal of assets (1.3) (2.4) (2.4) (3.2) Stock-based compensation increased in 114.6 120.4 247.3 235.3 2019 due to higher SARs cost resulting Certain items non-indicative of ongoing from an increase in the applicable peer operating performance: multiple and Adjusted EBITDA growth in Loss on early extinguishment of debt (2.3) — (2.3) — the home health and hospice segment Transaction costs (0.4) — (1.0) (1.0) (see page 19). SARs mark-to-market impact on u noncontrolling interests (see page 19) 2.6 0.9 3.4 1.9 The loss on early extinguishment of debt Change in fair market value of equity resulted from the Company’s redemption securities 0.3 (0.4) 1.2 (1.0) of $100 million of its 5.75% Senior Notes Payroll taxes on SARs exercise — — (0.2) — due 2024 in Q2 2019.(3) Pre-tax income 114.8 120.9 248.4 235.2 u The lower effective tax rate in 2019 Income tax expense (23.5) (29.3) (54.3) (59.3) resulted primarily from the deductible Income from continuing operations* $ 91.3 $ 91.6 $ 194.1 $ 175.9 portion of the settlement with the United (1) Diluted shares (see page 35) 99.3 99.6 99.5 99.6 States Department of Justice and Diluted earnings per share* $ 0.92 $ 0.92 $ 1.95 $ 1.76 windfall tax benefits related to the vesting of share-based compensation. Encompass Health * Earnings per share are determined using income from continuing operations attributable to Encompass Health. 12 Refer to pages 48-49 for end notes.

Adjusted earnings per share(4) Q2 6 Months 2019 2018 2019 2018 Earnings per share, as reported $ 0.92 $ 0.92 $ 1.95 $ 1.76 Adjustments, net of tax: Mark-to-market adjustment for stock appreciation rights (see page 19) 0.21 0.07 0.28 0.15 Transaction costs — — 0.01 0.01 Income tax adjustments (0.07) (0.01) (0.12) (0.01) Loss on early extinguishment of debt(3) 0.02 — 0.02 — Change in fair market value of equity securities — — (0.01) 0.01 Adjusted earnings per share* $ 1.08 $ 0.99 $ 2.12 $ 1.92 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. * Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 44-47. Encompass Health 13 Refer to pages 48-49 for end notes.

2019 Adjusted free cash flow(5) $40.2 $18.8 $8.0 ($76.8) ($1.6) $281.4 $270.0 Adjusted free cash Adjusted Working capital Cash interest Cash tax Maintenance Adjusted free cash flow 6 Mos. 2018 EBITDA and other payments payments, capital expenditures flow 6 Mos. 2019 net of refunds u Adjusted free cash flow for year-to-date 2019 decreased as increased Adjusted EBITDA and lower cash taxes were offset by an increase in working capital. Ÿ Increased working capital primarily resulted from higher accounts receivable related to the initiation of TPE reviews in both segments in the first half of 2019 and the recovery of previously denied claims in the first half of 2018 (see page 24). Reconciliations to GAAP provided on pages 39-47 Encompass Health 14 Refer to pages 48-49 for end notes.

Guidance - updated as of July 29, 2019 Previous 2019 Full-Year Updated 2019 Full-Year Guidance Guidance Net operating revenues Net operating revenues $4,500 million to $4,600 million $4,500 million to $4,600 million Adjusted EBITDA(6) Adjusted EBITDA(6) $925 million to $945 million $940 million to $960 million Adjusted earnings per share Adjusted earnings per share from continuing operations from continuing operations attributable to Encompass attributable to Encompass Health(4) Health(4) $3.71 to $3.85 $3.71 to $3.85 2019 guidance now includes the Company's acquisition of Alacare Home Health and Hospice which closed on July 1, 2019. Encompass Health Refer to pages 48-49 for end notes. 15

2019 Guidance considerations Inpatient rehabilitation Home health and hospice u Estimated 1.2% increase in Medicare pricing u Estimated 1.5% net Medicare pricing increase before before reserves related to bad debt for Q3; reserves related to bad debt for second half of 2019 estimated 0% to (0.25)% reimbursement rate (see page 26) change for Q4 (see page 26) u Salary increase of approx. 3.0%; benefits increase of u approx. 6.0% to 8.0% (see page 27) Salary increase of approx. 3.0%; benefits u increase of approx. 6.0% to 8.0% (see page 27) Inclusive of up to $50 million of home health and hospice acquisitions in 2019 and the acquisition of u Revenue reserve related to bad debt of 1.4% Alacare on July 1, 2019 u to 1.6% of net operating revenues Inclusive of the reduction in noncontrolling interests related to the redemption of the rollover shares (see u Administrative costs related to transition to page 19) u CARE Tool payment system Administrative costs related to the Review Choice Demonstration program and preparation for PDGM Consolidated u Increased interest expense associated with funding the Alacare acquisition, DOJ settlement(1), purchase of the home health rollover shares, and exercise of the stock appreciation rights (see page 19) u Increased depreciation and amortization resulting from the acquisition of Alacare u Investments of $3 million to $5 million in strategic initiatives, including post-acute solutions u Ongoing effects of Hurricane Michael on operations in the Panama City, Florida market u Diluted share count of ~100 million shares u Tax rate of ~27% u Adoption of new lease accounting standard resulted in a gross-up of assets and corresponding liabilities of ~$350 million and will not have a material impact on our income statement or statement of cash flows. Encompass Health 16

Adjusted free cash flow(5) assumptions 6 Months 6 Months u Certain cash flow items 2018 2019 2018 2019 Increased 2019 (millions) Actual Actual Actual Assumptions assumption for cash interest payments due to funding of the acquisition of Cash interest payments (net Alacare (see of amortization of debt $71.3 $72.9 $143.3 $155 to $165 page 5), DOJ (1) discounts and fees) Settlement , and put of home health rollover shares and SARs (see page 19); Cash payments for income former range was $51.4 $32.6 $114.8 $110 to $130 taxes, net of refunds $145 million to $155 million u Increased 2019 Working capital and other $(21.3) $55.5 $(48.1) $30 to $50 assumption for free cash flow due to increased Adjusted EBITDA guidance range partially Maintenance CAPEX $72.1 $64.1 $152.9 $160 to $170 offset by higher cash interest expense (see pages 15 and 16); former range was $420 Adjusted free cash flow $281.4 $270.0 $538.1 $425 to $505 million to $500 million Encompass Health Reconciliations to GAAP provided on pages 39-47; Refer to pages 48-49 for end notes. 17

Uses of free cash flow 6 Months 2019 2019 2018 Actuals Assumptions Actuals IRF bed expansions $21.0 $40 to $50 $22.3 New IRFs - De novos 48.3 85 to 115 76.4 - Acquisitions — opportunistic — - Replacement IRFs and other 37.0 90 to 110 24.5 Growth in core Home health and hospice acquisitions business - Alacare Home Health and Hospice — 217.5 — - Camellia Healthcare — — 131.4 - All other 13.7 ~50 12.5 $482 to $543, excluding IRF Quarterly cash dividend currently $120.0 acquisitions $267.1 set at $0.28 per common share(7) Debt reduction Debt (borrowings) redemptions, net $(243.3) $ TBD $63.3 Cash dividends on common stock(7) 54.9 ~108 100.8 Shareholder Purchase of Home Health Holdings and other rollover shares and exercise of SARs distributions (see page 19) 13.4 231.6 69.4 Common stock repurchases 43.8 opportunistic — $(131.2) $TBD $233.5 ~$206 million authorization as of June 30, 2019(2) Encompass Health See the debt schedule on page 28. Refer to pages 48-49 for end notes. 18

Overview of rollover shares and SARs held by members of the home health and hospice management team Background 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 • The Company also granted stock appreciation rights (“SARs”) based on the fair value of the common stock of Home Health Holdings to certain members of that management team. Half of the Holdings SARs vested on Jan. 1, 2019, and the other half vest on Jan. 1, 2020. Once vested, they are exercisable until they expire on Dec. 31, 2024 or in connection with termination of employment. Original • Home Health Holdings was capitalized with a promissory note to the parent company totaling ~ Rollover $385 million (equal to 5.5x the segment’s 2014 EBITDA). This was done to provide the opportunity Shares for leveraged returns on the equity, thereby mimicking a private equity transaction structure. 16.7% • To the extent Home Health Holdings needs cash (e.g., acquisitions, capex, etc.), such amounts are added to the principal amount of the note(s). Cash generated from the operations of Home Health Holdings may be used to pay interest and principal on the note(s). 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; Options 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 Fair value of the Rollover Shares and SARs 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 Valuation recent transactions, less the current balance of the intracompany note(s) to the parent. As of June 30, 2019, the value of the Rollover Shares was ~$326 million and the value of the SARs was ~$123 million. In February 2018 and July 2019, holders exercised their rights to sell their Rollover Shares to EHC. Each exercise represented ~5.6% of the outstanding common shares of Home Health Holdings. EHC settled the acquisition of the February 2018 exercise upon payment of ~$65 million and expects to settle the acquisition of the July 2019 exercise upon payment of ~$163 million in Q3 2019. After settling the July 2019 exercise, management’s ownership interest will Activity be ~5.6%. In the first quarter of 2019, holders exercised a portion of their vested SARs for cash proceeds of ~$13 million. In July 2019, holders exercised the remaining portion of their vested SARs for cash proceeds of ~$55 million, which is expected to be paid in cash in Q3 2019. Encompass Health 19

Appendix

Encompass Health a leading provider of inpatient rehabilitation and home-based care Market overlap 83 of EHC’s IRFs have an EHC home health location within the service area.* Portfolio as of June 30, 2019 Inpatient rehabilitation hospitals (“IRFs”) Home health locations Hospice locations 5 Future IRFs** 37 States and Puerto Rico ~41,700 employees The 23 home health and 23 hospice locations acquired in the acquisition of Alacare on July 1, 2019 are excluded from these tables. Inpatient rehabilitation - 06/30/19 Home health and hospice - 06/30/19 131 IRFs (46 are joint ventures) 222 Home health locations 32 States and Puerto Rico Largest owner and 59 Hospice locations ~30,800 Employees operator of IRFs 31 States 22% of licensed beds† ~10,900 Employees 4th Largest provider of 30% of Medicare patients served† Key statistics - trailing 4 quarters Medicare-certified Key statistics - trailing 4 quarters skilled home health 145,287 Home health admissions 182,016 Inpatient discharges services 8,786 Hospice admissions ~$3.4 Billion in revenue ~$1.0 Billion in revenue † * Excluding markets that have home health licensure barriers ** Previously announced under development Based on 2017 data Encompass Health Note: One of the 131 IRFs, two of the 222 home health locations, and one of the 59 hospice locations are nonconsolidated. 21 These locations are accounted for using the equity method of accounting.

Rebranding and name change The Company’s rebranding and name change reinforce its existing strategy and position as an integrated provider of inpatient and home-based care. JULY 2017 APRIL 2018 OCT. 2018 Announced Phase 1 field asset Phase 3 field asset planned conversions conversions name change JAN. 2018 JULY 2018 JAN. 2019 As of Jan. 1, 2019, all of the Legally changed Phase 2 field asset Phase 4 field asset Company’s hospitals and name and conversions conversions; home health and hospice stock ticker to transition complete locations have been Encompass Health Corporation (EHC) transitioned to the Encompass Health brand. 2017 2018 2019 Total Operating expenses* ~$6 million ~$11 million ~$1 million ~$18 million Capital expenditures ~$1 million ~$3 million ~$3 million ~$7 million Total rebranding investment ~$7 million ~$14 million ~$4 million ~$25 million Encompass Health *Included in corporate general and administrative expenses line item 22

Expansion activity Inpatient Rehabilitation Facilities - As of June 30, 2019 Previously announced IRF # of New Beds 5 development projects 2019 2020 2021 underway as of June 30, 2019 De novo: 3 1 Murrieta, CA 50 — — New states 2 Katy, TX 40 3 Sioux Falls, SD — 40 — Q2 2019 expansion activity highlights: 4 Coralville, IA — 40 — u Began operating a new 40-bed inpatient Joint ventures: rehabilitation hospital in Lubbock, Texas in May Lubbock, TX 40 — — 2019, a joint venture with University Medical Boise, ID 40 — — Center Health System 5 u Bed expansions, net* ~150 ~100 ~100 Added 81 beds to existing hospitals ~320 ~180 ~100 Home Health and Hospice Locations Q2 2019 expansion activity highlights: # of Locations u Opened one new home health location in South Dec. 31, 2018 278 Carolina Acquisitions 2 u Acquired Alacare Home Health and Hospice on July 1, Opening of new locations 2 2019 ü Merging of locations (1) 23 home health and 23 hospice locations across June 30, 2019 281 Alabama (not included in location count as of June 30, 2019) Encompass Health * Net bed expansions in each year may change due to the timing of certain regulatory approvals and/or construction delays. 23

Pre-payment claims denials - inpatient rehabilitation segment Background Encompass Health reserves pre-payment claim denials as a reduction of • For several years prior to 2018, under programs designated as net operating revenues upon notice from a MAC a claim is under review. “widespread probes,” certain Medicare Administrative Contractors (“MACs”) conducted pre-payment claim reviews and denied payment for certain diagnosis codes. Impact to Income Statement • Encompass Health appeals most denials. On claims it takes to an Update of Collections of Revenue Reserve for administrative law judge (“ALJ”), Encompass Health historically has Period New Denials Previously Reserve for Prior experienced an approximate 70% success rate. Denied Claims New Denials Denials – MACs identify medical documentation issues as a leading basis for (In Millions) denials. Q2 2019 $3.5 $(1.7) $1.1 $— – Encompass Health’s investment in clinical information systems and its Q1 2019 1.6 (2.5) 0.5 — medical services department has further improved its documentation Q4 2018 4.6 (3.2) 1.4 — and reduced technical denials. Q3 2018 0.7 (1.3) 0.2 — • By statute, ALJ decisions are due within 90 days of a request for hearing, Q2 2018 1.8 (2.8) 0.5 — but appeals are taking years. HHS has implemented rule changes to address the backlog of appeals, but their effect is uncertain. Q1 2018 3.1 (6.8) 0.9 — Q4 2017 0.7 (7.8) 0.2 — • In November 2018, a federal court ordered HHS to reduce the backlog in the following increments: a 19% reduction by the end of FY 2019; a 49% Q3 2017 7.4 (6.2) 2.2 — reduction by the end of FY 2020; a 75% reduction by the end of FY 2021; Q2 2017 16.5 (7.7) 4.9 — and elimination of the backlog by the end of FY 2022. Q1 2017 19.0 (5.9) 5.7 — • All Medicare providers continue to experience delays resulting in a Q4 2016 17.8 (4.4) 5.4 0.5 growing backlog. Q3 2016 15.7 (8.5) 4.6 — – Currently, ALJs are hearing Encompass Health appeals from claims Q2 2016 18.7 (4.9) 4.6 — denied up to eight years ago. Impact to Balance Sheet • In late 2017, CMS implemented the Targeted Probe and Educate (“TPE”) initiative. For more information regarding TPE, see https:// June 30, Dec. 31, Dec. 31, www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring- 2019 2018 2017 Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Targeted- (In Millions) Probe-and-EducateTPE.html Pre-payment claims denials $ 156.1 $ 158.1 $ 164.0 • Effective February 2018, Palmetto GBA assumed responsibilities for Recorded reserves (46.8) (47.4) (49.2) Cahaba’s MAC jurisdiction. See announcement from CMS at https:// www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative- Net accounts receivable from Contractors/Downloads/JurisdictionJAwardFactSheet-09082017.pdf pre-payment claims denials $ 109.3 $ 110.7 $ 114.8 Encompass Health 24

Business outlook: 2019 to 2021 2019 2020 2021 • Enhance clinical collaboration between the Company’s IRFs and home health locations Key • Build stroke market share (https://ehc.news/LifeAfterStroke) operational • Develop and implement post-acute solutions initiatives • Implement changes to reimbursement models in both business segments • Participate in alternative payment models • Same-store IRF growth Core • New-store IRF growth (de novos and acquisitions) growth • Same-store home health and hospice growth • New-store home health and hospice growth (acquisitions and de novos) Expansion of service Ÿ Consider acquisitions of other complementary businesses offerings Strong balance sheet • Maintain real estate ownership strategy and balance sheet flexibility Shareholder • Quarterly cash dividends on common stock and other • Opportunistic common stock repurchases distributions • Purchases of Home Health Holdings rollover shares and exercises of SARs Encompass Health 25

Business outlook 2019 to 2021: revenue assumptions Volume Inpatient Rehabilitation* Home Health* (includes new stores) 3+% annual discharge growth 10+% annual admission growth Approx. 73% of segment revenue Approx. 85% of segment revenue Medicare Pricing FY 2019 FY 2020 FY 2021 CY 2019 CY 2020 CY 2021 Amounts are approximations Q418-Q319 Q419-Q320(8) Q420-Q321 Q119-Q419 Q120-Q420(9) Q121-Q421 Final Rule Proposed Rule Estimate† Final Rule Proposed Rule Estimate† Market basket update 2.9% 3.0% 3.3% 3.0% 1.5% 3.2% Healthcare reform reduction (0.75%) - - - - - Legislative changes to the rural add-on program(9) - - - (0.1%) (0.2%) (0.1%) Change in outlier fixed-dollar loss ratio - - - 0.1% - - Healthcare reform productivity adjustment (0.8%) (0.5%) (0.6%) (0.8%) - (0.6%) Net market basket update 1.35% 2.5% 2.7% 2.2% 1.3% 2.5% Change in wage index and other (0.1%) (0.1%) - - - - labor adjustments Change in CMG relative weights and (2.4%) to average length of stay values(8) (0.1%) (2.65%) - - - - Change in outlier threshold (0.0%) (0.0%) - - - - Impact from case mix re-weighting - - - (0.7%) - - Estimated impact to Encompass Health 1.2% 0% to (0.25)% 1.5% (2.8%)** Medicare Advantage Approx. 20% of revenue Approx. 13% of revenue and managed care pricing Expected increases 2-4% 1-3% 2-4% 0-2% 0-2% 0-2% * Outpatient and hospice, which services accounted for 5.0% of total operating revenues for full-year 2018, are not included in the pricing assumptions. ** Estimated PDGM impact of (4.1%) plus 1.3% net market basket update; excludes assumed behavioral change reduction of 8.0%.(9) † Estimates are based on current CMS and Congressional Budget Office projections Encompass Health which do not include potential changes from legislation or the CMS rule-making process. 26 Refer to pages 48-49 for end notes.

Business outlook 2019 to 2021: labor and other expense assumptions Inpatient Rehabilitation Home Health and Hospice Salaries and Benefits 2019 2020 2021 Salary increases 2.75-3.25% 2.75-3.25% 2.85-3.35% Benefit costs increases 6-8% 5-10% 5-10% Segment Operating Expenses Salaries Salaries and benefits and benefits ~70% ~85% % of Salaries and Benefits Salaries ~90% Other Other expenses Benefits ~10% expenses ~30% ~15% IRF Expenses Home Health and Hospice Expenses •Other operating expenses and supply •Other operating expenses and supply costs tracking with inflation costs tracking with inflation Encompass Health 27

Debt schedule Change in June 30, December 31, Debt vs. ($millions) 2019 2018 YE 2018 Advances under $700 million revolving credit facility, September 2022 - LIBOR +150bps $ 335.0 $ 30.0 $ 305.0 Term loan facility, September 2022 - LIBOR +150bps 272.8 280.1 (7.3) Bonds Payable: 5.125% Senior Notes due 2023 297.0 296.6 0.4 5.75% Senior Notes due 2024(3) 1,095.5 1,194.7 (99.2) 5.75% Senior Notes due 2025 345.3 345.0 0.3 Other notes payable 16.9 104.2 (87.3) Finance lease obligations 395.2 263.8 131.4 Long-term debt $ 2,757.7 $ 2,514.4 $ 243.3 Debt to Adjusted EBITDA 2.9x 2.8x Encompass Health Reconciliations to GAAP provided on pages 39-47 Refer to pages 48-49 for end notes. 28

Debt maturity profile - face value As of June 30, 2019* Callable beginning September 2020 ($ in millions) Callable beginning November 2017(3) $326 Available $1,100 Callable beginning Senior March 2018 Notes Revolver 5.75% $335 Drawn capacity + $39 reserved for $350 Senior LC’s $273 $300 Senior Revolver Notes 5.75% Term Loans Notes 5.125% 2018 2021 2022 2022 2023 2024 2025 No significant debt maturities prior to 2022 * This chart does not include ~$395 million of finance lease obligations or ~$17 million of other notes payable. Encompass Health See the debt schedule on page 28; Refer to pages 48-49 for end notes. 29

New-store/same-store growth Inpatient Rehabilitation 25.0 Shelby County, AL (34 beds) 20.0 Bryan, TX (49 beds) Bluffton, SC (38 beds) Broken Arrow, OK (22 beds) Pearland, TX 15.0 Murrells Inlet, (40 beds) Lubbock, TX Gulfport, MS (33 beds) SC (29 beds) (40 beds) Westerville, OH (60 beds) 10.0 Jackson, TN Winston-Salem, Modesto, CA (48 beds) NC (68 beds) (50 beds) 5.0 0.0 Discharges Q3Q3 20162016 Q4Q4 20162016 Q1Q1 20172017 Q2Q2 20172017 Q3Q3 20172017 Q4Q4 20172017 Q1Q1 20182018 Q2Q2 20182018 QQ33 22018018 QQ44 22018018 QQ11 22019019 QQ22 22019019 New store 10.7% 1.3% 1.2% 1.9% 2.4% 2.0% 1.9% 1.6% 1.0% 1.7% 1.3% 1.5% Same store 1.9% 0.1% 1.6% 1.6% 1.4% 3.9% 4.8% 3.6% 2.0% 1.9% (0.2)% 2.2% Total by qtr. 12.6% 1.4% 2.8% 3.5% 3.8% 5.9% 6.7% 5.2% 3.0% 3.6% 1.1% 3.7% Total by year 10.8% 4.0% 4.6% Same-store year* 1.7% 1.8% 2.8% Same-store year UDS(10) (0.6)% (0.5)% 1.1% * Includes consolidated inpatient rehabilitation hospitals classified as same store during each period Encompass Health Refer to pages 48-49 for end notes. 30

New-store/same-store growth Home Health Acquired CareSouth 60.0 (44 home health locations in 7 states) in November 2015 50.0 40.0 30.0 Acquired Camellia Healthcare (14 home health locations in 3 states) in May 2018 20.0 10.0 0.0 Admissions QQ33 2 2016016 QQ44 22016016 QQ11 22017017 QQ22 22017017 QQ33 22017017 QQ44 22017017 QQ11 22018018 QQ22 22018018 QQ33 22018018 QQ44 22018018 Q1Q1 20192019 Q2Q2 20192019 New store 35.4% 8.1% 5.7% 6.4% 6.7% 3.5% 2.5% 5.3% 5.4% 5.3% 5.7% 2.9% Same store* 15.3% 14.0% 13.9% 13.3% 8.8% 10.1% 7.4% 5.1% 3.8% 5.4% 6.4% 8.3% Total by quarter 50.7% 22.1% 19.6% 19.7% 15.5% 13.6% 9.9% 10.4% 9.2% 10.7% 12.1% 11.2% Total by year 43.6% 17.0% 10.0% Same-store year* 13.7% 11.4% 5.6% u In 2016, the Company acquired or opened 10 home health locations. u In 2017, the Company acquired or opened 15 home health locations. u In 2018, the Company acquired or opened 23 home health locations. u In 2019, the Company acquired or opened 3 home health locations. Encompass Health * Includes consolidated home health agencies classified as same store during each period 31

Payment sources (percent of revenues) Inpatient Home Health Rehabilitation and Hospice Consolidated Segment Segment Q2 Q2 Q2 6 Months Full Year 2019 2018 2019 2018 2019 2018 2019 2018 2018 Medicare 72.1% 72.8% 84.7% 85.5% 74.9% 75.5% 75.4% 76.1% 75.9% Medicare Advantage 11.1% 9.4% 10.2% 9.3% 10.9% 9.4% 10.3% 9.1% 9.2% Managed care 9.9% 10.4% 3.1% 3.7% 8.3% 8.9% 8.3% 8.9% 8.8% Medicaid 3.1% 3.2% 1.8% 1.2% 2.8% 2.8% 2.8% 2.6% 2.6% Other third-party payors 1.2% 1.5% —% —% 0.9% 1.2% 0.9% 1.2% 1.1% Workers’ compensation 0.7% 0.8% 0.1% 0.1% 0.6% 0.7% 0.7% 0.7% 0.7% Patients 0.6% 0.5% —% 0.1% 0.5% 0.4% 0.5% 0.4% 0.5% Other income 1.3% 1.4% 0.1% 0.1% 1.1% 1.1% 1.1% 1.0% 1.2% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Encompass Health 32

Inpatient rehabilitation operational and labor metrics Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2019 2019 2018 2018 2018 2018 2018 (In Millions) Net patient revenue-inpatient $ 851.8 $ 847.6 $ 822.8 $ 798.4 $ 809.6 $ 817.1 $ 3,247.9 Net patient revenue-outpatient and other revenues 22.1 22.5 22.9 27.2 25.0 23.2 98.3 Net operating revenues $ 873.9 $ 870.1 $ 845.7 $ 825.6 $ 834.6 $ 840.3 $ 3,346.2 (Actual Amounts) Discharges(11) 46,679 45,609 45,498 44,230 45,010 45,108 179,846 Net patient revenue per discharge $ 18,248 $ 18,584 $ 18,084 $ 18,051 $ 17,987 $ 18,114 $ 18,059 Outpatient visits 104,566 102,028 111,399 119,006 131,041 127,308 488,754 Average length of stay 12.5 12.8 12.5 12.7 12.5 12.7 12.6 Occupancy % 70.6% 72.3% 68.8% 68.9% 70.1% 71.9% 69.3% # of licensed beds 9,062 8,941 8,966 8,888 8,848 8,831 8,966 Occupied beds 6,398 6,464 6,169 6,124 6,202 6,349 6,213 Full-time equivalents (FTEs)(12) 21,570 21,345 21,199 21,119 21,010 20,978 21,076 Contract labor 227 246 266 237 248 285 259 Total FTE and contract labor 21,797 21,591 21,465 21,356 21,258 21,263 21,335 EPOB(13) 3.41 3.34 3.48 3.49 3.43 3.35 3.43 Refer to pages 48-49 for end notes. Encompass Health 33

Home health and hospice operational metrics Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2019 2019 2018 2018 2018 2018 2018 (In Millions) Net home health revenue $ 222.7 $ 219.5 $ 215.3 $ 209.2 $ 204.8 $ 185.3 $ 814.6 Net hospice revenue 38.4 34.4 35.0 32.8 28.3 20.4 116.5 Net operating revenues $ 261.1 $ 253.9 $ 250.3 $ 242.0 $ 233.1 $ 205.7 $ 931.1 Home Health: (Actual Amounts) Admissions(14) 37,828 37,944 35,151 34,364 34,026 33,855 137,396 Recertifications 28,129 28,282 29,530 28,733 28,089 25,229 111,581 Episodes 66,881 63,626 64,037 61,765 61,238 56,658 243,698 Average revenue per episode $ 2,959 $ 3,057 $ 2,972 $ 2,995 $ 2,968 $ 2,934 $ 2,968 Episodic visits per episode 17.1 17.7 17.4 17.6 17.5 17.9 17.6 Total visits 1,325,362 1,308,610 1,285,150 1,259,055 1,240,490 1,174,950 4,959,645 Cost per visit $ 76 $ 75 $ 76 $ 77 $ 76 $ 75 $ 76 Hospice: Admissions(15) 2,324 2,378 2,030 2,054 1,797 1,593 7,474 Patient days 259,501 239,022 231,515 223,834 192,404 143,231 790,984 Average daily census 2,852 2,656 2,516 2,433 2,114 1,591 2,167 Revenue per day $ 148 $ 144 $ 151 $ 147 $ 148 $ 142 $ 147 Encompass Health Refer to pages 48-49 for end notes. 34

Share information Weighted Average for the Period Q2 6 Months Full Year 2019 2018 2019 2018 2018 2017 2016 Basic shares outstanding(16) 98.0 97.9 98.2 97.9 97.9 93.7 89.1 Convertible senior subordinated notes(16) — — — — — 4.0 8.5 Restricted stock awards, dilutive stock options, restricted stock units, and common stock warrants 1.3 1.7 1.3 1.7 1.9 1.6 1.9 Diluted shares outstanding 99.3 99.6 99.5 99.6 99.8 99.3 99.5 End of Period Q2 6 Months Full Year (Millions) 2019 2018 2019 2018 2018 2017 2016 Basic shares outstanding(16) 97.8 98.0 97.8 98.0 97.6 97.6 88.3 Encompass Health Refer to pages 48-49 for end notes. 35

Segment operating results Q2 2019 Q2 2018 Home Home Health and Health and (In Millions) IRF Hospice Reclasses Consolidated IRF Hospice Reclasses Consolidated Net operating revenues $ 873.9 $ 261.1 $ — $ 1,135.0 $ 834.6 $ 233.1 $ — $ 1,067.7 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (443.6) — (179.3) (622.9) (416.5) — (161.7) (578.2) Other operating expenses(a) (127.2) — (21.3) (148.5) (126.9) — (20.1) (147.0) Supplies (36.7) — (5.0) (41.7) (34.7) — (4.6) (39.3) Occupancy (16.3) — (4.0) (20.3) (16.0) — (3.5) (19.5) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (119.9) 119.9 — — (109.1) 109.1 — Support and overhead costs — (89.7) 89.7 — — (80.8) 80.8 — (623.8) (209.6) — (833.4) (594.1) (189.9) — (784.0) Other income(b) 1.9 — — 1.9 1.2 0.5 — 1.7 Equity in net income of nonconsolidated affiliates 1.4 0.4 — 1.8 1.6 0.4 — 2.0 Noncontrolling interests(c) (19.5) (2.8) — (22.3) (19.8) (2.5) — (22.3) Segment Adjusted EBITDA $ 233.9 $ 49.1 $ — 283.0 $ 223.5 $ 41.6 $ — 265.1 General and administrative expenses(d)(e) (30.8) (33.5) Adjusted EBITDA $ 252.2 $ 231.6 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 1.4 $ (0.1) $ — $ 1.3 $ 2.4 $ — $ — $ 2.4 (b) Change in fair market value of $ (0.3) $ — $ — $ (0.3) $ 0.4 $ — $ — $ 0.4 equity securities (c) SARs mark-to-market impact on $ — $ (2.6) $ — $ (2.6) $ — $ (0.9) $ — $ (0.9) noncontrolling interests (see page 19) (d) Stock-based compensation $ — $ — $ — $ 45.9 $ — $ — $ — $ 21.4 (e) Transaction costs $ — $ — $ — $ 0.4 $ — $ — $ — $ — Encompass Health Reconciliations to GAAP provided on pages 39-47 36

Segment operating results Six Months Ended June 30, 2019 Six Months Ended June 30, 2018 Home Home Health and Health and (In Millions) IRF Hospice Reclasses Consolidated IRF Hospice Reclasses Consolidated Net operating revenues $ 1,744.0 $ 515.0 $ — $ 2,259.0 $ 1,674.9 $ 438.8 $ — $ 2,113.7 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (888.6) — (354.9) (1,243.5) (840.7) — (307.7) (1,148.4) Other operating expenses(a) (254.8) — (42.7) (297.5) (249.8) — (37.6) (287.4) Supplies (72.3) — (9.5) (81.8) (70.6) — (8.6) (79.2) Occupancy (32.1) — (7.8) (39.9) (31.5) — (6.6) (38.1) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (236.4) 236.4 — — (207.7) 207.7 — Support and overhead costs(b) — (178.5) 178.5 — — (152.8) 152.8 — (1,247.8) (414.9) — (1,662.7) (1,192.6) (360.5) — (1,553.1) Other income(c) 4.7 — — 4.7 1.7 0.5 — 2.2 Equity in net income of nonconsolidated affiliates 3.5 0.8 — 4.3 3.6 0.7 — 4.3 Noncontrolling interests(d) (40.5) (5.5) — (46.0) (40.3) (4.4) — (44.7) Segment Adjusted EBITDA $ 463.9 $ 95.4 $ — 559.3 $ 447.3 $ 75.1 $ — 522.4 General and administrative expenses(e)(f) (64.2) (67.5) Adjusted EBITDA $ 495.1 $ 454.9 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 2.5 $ (0.1) $ — $ 2.4 $ 3.2 $ — $ — $ 3.2 (b) Payroll taxes on SARs exercise $ — $ 0.2 $ — $ 0.2 $ — $ — $ — $ — (c) Change in fair market value of $ (1.2) $ — $ — $ (1.2) $ 1.0 $ — $ — $ 1.0 equity securities (d) SARs mark-to-market impact on $ — $ (3.4) $ — $ (3.4) $ — $ (1.9) $ — $ (1.9) noncontrolling interests (see page 19) (e) Stock-based compensation $ — $ — $ — $ 65.3 $ — $ — $ — $ 47.5 (f) Transaction costs $ — $ — $ — $ 1.0 $ — $ — $ — $ 1.0 Encompass Health Reconciliations to GAAP provided on pages 39-47 37

Segment operating results Year Ended December 31, 2018 Home Health and (In Millions) IRF Hospice Reclasses Consolidated Net operating revenues $ 3,346.2 $ 931.1 $ — $ 4,277.3 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (1,701.5) — (652.5) (2,354.0) Other operating expenses(a) (502.3) — (77.1) (579.4) Supplies (140.6) — (18.1) (158.7) Occupancy (63.8) — (14.2) (78.0) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (438.4) 438.4 — Support and overhead costs — (323.5) 323.5 — (2,408.2) (761.9) — (3,170.1) Other income(b) 3.6 0.5 — 4.1 Equity in net income of nonconsolidated affiliates 7.5 1.2 — 8.7 Noncontrolling interests(c) (77.2) (8.5) — (85.7) Segment Adjusted EBITDA $ 871.9 $ 162.4 $ — 1,034.3 General and administrative expenses(d)(e) (133.3) Adjusted EBITDA $ 901.0 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss on disposal of assets $ 5.7 $ — $ — $ 5.7 (b) Change in fair market value of equity securities $ 1.9 $ — $ — $ 1.9 (c) SARs mark-to-market impact on noncontrolling interests (see page 19) $ — $ (2.6) $ — $ (2.6) (d) Stock-based compensation $ — $ — $ — $ 85.9 (e) Transaction costs $ — $ — $ — $ 1.0 Encompass Health Reconciliations to GAAP provided on pages 39-47 38 .

Reconciliation of net income to Adjusted EBITDA(6) 2019 Q1 Q2 6 Months Per Per Per (in millions, except per share data) Total Share Total Share Total Share Net Income $ 125.2 $ 110.9 $ 236.1 Loss from disc ops, net of tax, attributable to Encompass Health 0.5 0.1 0.6 Net income attributable to noncontrolling interests (22.9) (19.7) (42.6) Income from continuing operations attributable to Encompass Health* 102.8 $ 1.04 91.3 $ 0.92 194.1 $ 1.95 Provision for income tax expense 30.8 23.5 54.3 Interest expense and amortization of debt discounts and fees 37.2 37.7 74.9 Depreciation and amortization 52.5 52.7 105.2 Loss on early extinguishment of debt — 2.3 2.3 Net noncash loss on disposal of assets 1.1 1.3 2.4 Stock-based compensation expense 19.4 45.9 65.3 Transaction costs 0.6 0.4 1.0 SARs mark-to-market impact on noncontrolling interests (see page 19) (0.8) (2.6) (3.4) Change in fair market value of equity securities (0.9) (0.3) (1.2) Payroll taxes on SARs exercise 0.2 — 0.2 Adjusted EBITDA $ 242.9 $ 252.2 $ 495.1 Weighted average common shares outstanding: Basic 98.4 98.0 98.2 Diluted 99.7 99.3 99.5 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Encompass Health Refer to pages 48-49 for end notes. 39

Reconciliation of net income to Adjusted EBITDA(6) 2018 Q1 Q2 Q3 Q4 Full Year Per Per Per Per Per (in millions, except per share data) Total Share Total Share Total Share Total Share Total Share Net Income $ 105.2 $ 113.2 $ 109.3 $ 47.7 $ 375.4 Loss (income) from disc ops, net of tax, attributable to Encompass Health 0.5 (0.2) 0.1 (1.5) (1.1) Net income attributable to noncontrolling interests (21.4) (21.4) (20.7) (19.6) (83.1) Income from continuing operations attributable to Encompass Health* 84.3 $ 0.85 91.6 $ 0.92 88.7 $ 0.89 26.6 $ 0.26 291.2 $ 2.92 Gov’t, class action, and related settlements — — — 52.0 52.0 Provision for income tax expense 30.0 29.3 30.2 29.4 118.9 Interest expense and amortization of debt discounts and fees 35.6 37.7 37.3 36.7 147.3 Depreciation and amortization 45.9 49.7 51.2 52.9 199.7 Net noncash loss (gain) on disposal of assets 0.8 2.4 (1.0) 3.5 5.7 Stock-based compensation expense 26.1 21.4 18.1 20.3 85.9 Transaction costs 1.0 — — — 1.0 SARs mark-to-market impact on noncontrolling interests (see page 19) (1.0) (0.9) (0.3) (0.4) (2.6) Change in fair market value of equity securities 0.6 0.4 0.1 0.8 1.9 Adjusted EBITDA $ 223.3 $ 231.6 $ 224.3 $ 221.8 $ 901.0 Weighted average common shares outstanding: Basic 97.8 97.9 98.0 98.0 97.9 Diluted 99.4 99.6 100.0 100.0 99.8 Encompass Health * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. 40 Refer to pages 48-49 for end notes.

Net cash provided by operating activities reconciled to Adjusted EBITDA(6) Q2 6 Months Full Year (In Millions) 2019 2018 2019 2018 2018 Net cash provided by operating activities $ 145.4 $ 169.2 $ 305.3 $ 385.5 $ 762.4 Interest expense and amortization of debt discounts and fees 37.7 37.7 74.9 73.3 147.3 Equity in net income of nonconsolidated affiliates 1.8 2.0 4.3 4.3 8.7 Net income attributable to noncontrolling interests in continuing operations (19.7) (21.4) (42.6) (42.8) (83.1) Amortization of debt-related items (1.0) (1.0) (2.0) (2.0) (4.0) Distributions from nonconsolidated affiliates (2.5) (2.3) (4.6) (3.5) (8.3) Current portion of income tax expense 25.5 29.9 53.7 62.9 128.0 Change in assets and liabilities 65.2 18.4 101.7 (22.3) (46.0) Cash used in (provided by) operating activities of discontinued operations 1.5 (0.1) 4.5 0.6 (0.8) Transaction costs 0.4 — 1.0 1.0 1.0 SARs mark-to-market impact on noncontrolling interests (see page 19) (2.6) (0.9) (3.4) (1.9) (2.6) Payroll taxes on SARs exercise — — 0.2 — — Change in fair market value of equity securities (0.3) 0.4 (1.2) 1.0 1.9 Other 0.8 (0.3) 3.3 (1.2) (3.5) Adjusted EBITDA $ 252.2 $ 231.6 $ 495.1 $ 454.9 $ 901.0 Encompass Health Refer to pages 48-49 for end notes. 41

Reconciliation of segment Adjusted EBITDA to income from continuing operations before income tax expense Three Months Ended Six Months Ended Year Ended June 30, June 30, December 31, 2019 2018 2019 2018 2018 (In Millions) Total segment Adjusted EBITDA $ 283.0 $ 265.1 $ 559.3 $ 522.4 $ 1,034.3 General and administrative expenses (77.1) (54.9) (130.5) (116.0) (220.2) Depreciation and amortization (52.7) (49.7) (105.2) (95.6) (199.7) Loss on disposal of assets (1.3) (2.4) (2.4) (3.2) (5.7) Government, class action, and related settlements — — — — (52.0) Loss on early extinguishment of debt (2.3) — (2.3) — — Interest expense and amortization of debt discounts and fees (37.7) (37.7) (74.9) (73.3) (147.3) Net income attributable to noncontrolling interests 19.7 21.4 42.6 42.8 83.1 SARs mark-to-market impact on noncontrolling interests (see page 19) 2.6 0.9 3.4 1.9 2.6 Change in fair market value of equity securities 0.3 (0.4) 1.2 (1.0) (1.9) Payroll taxes on SARs exercise — — (0.2) — — Income from continuing operations before income tax expense $ 134.5 $ 142.3 $ 291.0 $ 278.0 $ 493.2 Encompass Health 42

Reconciliation of net cash provided by operating activities to adjusted free cash flow(5) Q2 6 Months Full Year (In Millions) 2019 2018 2019 2018 2018 Net cash provided by operating activities $ 145.4 $ 169.2 $ 305.3 $ 385.5 $ 762.4 Impact of discontinued operations 1.5 (0.1) 4.5 0.6 (0.8) Net cash provided by operating activities of continuing operations 146.9 169.1 309.8 386.1 761.6 Capital expenditures for maintenance (34.5) (36.0) (64.1) (72.1) (152.9) Distributions paid to noncontrolling interests of consolidated affiliates (17.0) (19.8) (36.5) (35.2) (75.4) Items non-indicative of ongoing operating performance: Cash paid for government, class action, and related settlements 46.4 — 46.4 — — Transaction costs and related assumed liabilities 0.4 (2.1) 1.0 (1.7) 0.5 Cash paid for SARs exercise — — 13.4 4.3 4.3 Adjusted free cash flow $ 142.2 $ 111.2 $ 270.0 $ 281.4 $ 538.1 Cash dividends on common stock $ 26.6 $ 24.5 $ 54.9 $ 49.9 $ 100.8 Encompass Health Refer to pages 48-49 for end notes. 43

Adjusted EPS(4) - Q2 2019 For the Three Months Ended June 30, 2019 Adjustments Mark-to- Market Change in Adjustment Loss on Fair Market for Stock Early Value of As Comp. Exting. Income Tax Transaction Equity As Reported Expense of Debt Adjustments Costs Securities Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 252.2 $ — $ — $ — $ — $ — $ 252.2 Depreciation and amortization (52.7) — — — — — (52.7) Loss on early extinguishment of debt(3) (2.3) — 2.3 — — — — Interest expense and amortization of debt discounts and fees (37.7) — — — — — (37.7) Stock-based compensation (45.9) 31.4 — — — — (14.5) Loss on disposal of assets (1.3) — — — — — (1.3) Transaction costs (0.4) — — — 0.4 — — SARs mark-to-market impact on noncontrolling interests (see page 19) 2.6 (2.6) — — — — — Change in fair market value of equity securities 0.3 — — — — (0.3) — Income from continuing operations before income tax expense 114.8 28.8 2.3 — 0.4 (0.3) 146.0 Provision for income tax expense (23.5) (7.8) (0.6) (7.2) (0.1) 0.1 (39.1) Income from continuing operations attributable to Encompass Health $ 91.3 $ 21.0 $ 1.7 $ (7.2) $ 0.3 $ (0.2) $ 106.9 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax — — Numerator for diluted earnings per share $ 91.3 $ 106.9 Diluted earnings per share from continuing operations* $ 0.92 $ 0.21 $ 0.02 $ (0.07) $ — $ — $ 1.08 Diluted shares used in calculation 99.3 Encompass Health * Adjusted EPS may not sum across due to rounding. 44 Refer to pages 48-49 for end notes.

Adjusted EPS(4) - Q2 2018 For the Three Months Ended June 30, 2018 Adjustments Mark-to- Market Change in Adjustment Fair Market on Stock Value of As Compensation Income Tax Equity As Reported Expense Adjustments Securities Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 231.6 $ — $ — $ — $ 231.6 Depreciation and amortization (49.7) — — — (49.7) Interest expense and amortization of debt discounts and fees (37.7) — — — (37.7) Stock-based compensation (21.4) 10.8 — — (10.6) Loss on disposal of assets (2.4) — — — (2.4) SARs mark-to-market impact on noncontrolling interests (see page 19) 0.9 (0.9) — — — Change in fair market value of equity securities (0.4) — — 0.4 — Income from continuing operations before income tax expense 120.9 9.9 — 0.4 131.2 Provision for income tax expense (29.3) (2.8) (0.6) (0.1) (32.8) Income from continuing operations attributable to Encompass Health $ 91.6 $ 7.1 $ (0.6) $ 0.3 $ 98.4 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax — — Numerator for diluted earnings per share $ 91.6 $ 98.4 Diluted earnings per share from continuing operations* $ 0.92 $ 0.07 $ (0.01) $ — $ 0.99 Diluted shares used in calculation 99.6 Encompass Health * Adjusted EPS may not sum across due to rounding. 45 Refer to pages 48-49 for end notes.

Adjusted EPS(4) - YTD 2019 For the Six Months Ended June 30, 2019 Adjustments Mark-to- Market Change in Adjustment Loss on Fair Market Payroll for Stock Early Value of Taxes on As Comp. Exting. Income Tax Transaction Equity SARs As Reported Expense of Debt Adjustments Costs Securities exercise Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 495.1 $ — $ — $ — $ — $ — $ — $ 495.1 Depreciation and amortization (105.2) — — — — — — (105.2) Loss on early extinguishment of debt(3) (2.3) — 2.3 — — — — — Interest expense and amortization of debt discounts and fees (74.9) — — — — — — (74.9) Stock-based compensation (65.3) 41.0 — — — — — (24.3) Loss on disposal of assets (2.4) — — — — — — (2.4) Transaction costs (1.0) — — — 1.0 — — — SARs mark-to-market impact on noncontrolling interests (see page 19) 3.4 (3.4) — — — — — — Change in fair market value of equity securities 1.2 — — — — (1.2) — — Payroll taxes on SARs exercise (0.2) — — — — — 0.2 — Income from continuing operations before income tax expense 248.4 37.6 2.3 — 1.0 (1.2) 0.2 288.3 Provision for income tax expense (54.3) (10.2) (0.6) (12.4) (0.3) 0.3 — (77.5) Income from continuing operations attributable to Encompass Health $ 194.1 $ 27.4 $ 1.7 $ (12.4) $ 0.7 $ (0.9) $ 0.2 $ 210.8 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax — — Numerator for diluted earnings per share $ 194.1 $ 210.8 Diluted earnings per share from continuing operations* $ 1.95 $ 0.28 $ 0.02 $ (0.12) $ 0.01 $ (0.01) $ — $ 2.12 Diluted shares used in calculation 99.5 Encompass Health * Adjusted EPS may not sum across due to rounding. 46 Refer to pages 48-49 for end notes.

Adjusted EPS(4) - YTD 2018 For the Six Months Ended June 30, 2018 Adjustments Mark-to- Market Change in Adjustment Fair Market on Stock Value of As Compensation Income Tax Transaction Equity As Reported Expense Adjustments costs Securities Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 454.9 $ — $ — $ — $ — $ 454.9 Depreciation and amortization (95.6) — — — — (95.6) Interest expense and amortization of debt discounts and fees (73.3) — — — — (73.3) Stock-based compensation (47.5) 22.4 — — — (25.1) Loss on disposal of assets (3.2) — — — — (3.2) Transaction costs (1.0) — — 1.0 — — SARs mark-to-market impact on noncontrolling interests (see page 19) 1.9 (1.9) — — — — Change in fair market value of equity securities (1.0) — — — 1.0 — Income from continuing operations before income tax expense 235.2 20.5 — 1.0 1.0 257.7 Provision for income tax expense (59.3) (5.7) (0.7) (0.3) (0.3) (66.3) Income from continuing operations attributable to Encompass Health $ 175.9 $ 14.8 $ (0.7) $ 0.7 $ 0.7 $ 191.4 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax — — Numerator for diluted earnings per share $ 175.9 $ 191.4 Diluted earnings per share from continuing operations* $ 1.76 $ 0.15 $ (0.01) $ 0.01 $ 0.01 $ 1.92 Diluted shares used in calculation 99.6 Encompass Health * Adjusted EPS may not sum across due to rounding. 47 Refer to pages 48-49 for end notes.

End notes (1) As previously disclosed, since 2013, the Company had been cooperating with an investigation of alleged improper or fraudulent Medicare and Medicaid claims. The investigation, under the direction of DOJ, had been pending seven years. The Company is aware of no evidence of fraud, falsity or wrongdoing. However, based on discussions with DOJ and having considered the burdens and distractions associated with continuing the investigation and the likely costs of future litigation, the Company estimated a settlement value of $48 million and accrued a loss contingency in that amount in the fourth quarter of 2018. Following further discussions, the Company entered into an agreement effective as of June 21, 2019 to settle the DOJ investigation, together with related qui tam or “whistleblower” lawsuits, for a cash payment of $48 million. (2) On Oct. 28, 2013, the Company announced its board of directors authorized the repurchase of up to $200 million of its common stock. On Feb. 14, 2014, the Company's board approved an increase in this common stock repurchase authorization from $200 million to $250 million. As of June 30, 2018, the remaining repurchase authorization was approximately $58 million. On July 24, 2018, the Company's board approved resetting the aggregate common stock repurchase authorization to $250 million. As of June 30, 2019, the remaining repurchase authorization was ~$206 million. (3) In June 2019, the Company redeemed $100 million of its 5.75% Senior Notes due 2024 at a price of 101.917%, which resulted in a total cash outlay of ~$102 million. The redemption was funded using cash on hand and funding under the Company’s revolving credit facility. As a result of the redemption, the Company recorded a $2.3 million loss on early extinguishment of debt in the second quarter of 2019. (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 and equity instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments, settlements of income tax claims and windfall tax benefits), 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) 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. (6) 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. (7) 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. On July 24, 2018, the board of directors approved a $0.02 per share, or 8.0%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.27 per common share. On July 23, 2019, the board of directors approved a $0.01 per share, or 3.7%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.28 per common share. Encompass Health * Reconciliations to GAAP provided on pages 39-47. 48

End notes, con’t. (8) On April 17, 2019, the Centers for Medicare and Medicaid Services (“CMS”) released its notice of proposed rule making for fiscal year 2020 under the inpatient rehabilitation facility prospective payment system (the “2020 Proposed IRF Rule”). Based on its analysis of the adjustments included in the proposed rule and other factors, including the acuity of the Company’s patients over the six-month period ended June 30, 2019, the Company currently estimates its Medicare payment rates for its inpatient rehabilitation segment will be flat to down 25 basis points in fiscal year 2020 (effective October 1, 2019). Beginning in FY 2020 (October 1, 2019), CMS proposes new case mix groupings, relative weights and length of stay values to reflect incorporation of CARE Tool assessment data. These changes will impact payment under the IRF-PPS. (9) On July 11, 2019, CMS released its notice of proposed rulemaking for calendar year 2020 (the “2020 Proposed HH Rule”) for home health agencies under the home health prospective payment system (the “HH-PPS”). The 2020 Proposed HH Rule would implement a net 1.3% market basket increase (market basket update of 1.5% reduced by 0.2% for an extension of the rural payment add-on factor) in 2020. Additionally, pursuant to the requirements of The Bipartisan Budget Act (“BBA”) of 2018, the 2020 Proposed HH Rule sets out significant changes to the HH-PPS, including a new payment system, referred to as the Patient- Driven Groupings Model (“PDGM”), that uses 30-day payment periods and relies more heavily on clinical characteristics and other patient information (such as principal diagnosis, functional level, referral source, and timing), rather than the current therapy service-use thresholds, to set payments. CMS also proposed an 8.0% reduction in the base payment rate for 2020 intended to offset the provider behavioral changes that CMS assumes PDGM will drive. The 2020 Proposed HH Rule would also eliminate by 2021 the process known as Request for Anticipated Payments (“RAPs”) which allows providers to seek reimbursement of either 50% or 60% of the estimated base payment for the full care episode at the beginning of that episode. As part of eliminating RAPs, CMS proposes that home health agencies would be required to submit certain documentation and information, through a notice of admission (“NOA”) within five days of initiating a care episode, with a payment penalty for failing to timely submit the NOA. CMS also proposed to adopt additional quality reporting measures and significantly increase the standardized patient assessment data elements collected by providers. Based on 2018 data and assuming no change in the foregoing and other factors, which are subject to potentially significant change, we estimate an approximate 2.8% incremental reduction (after the 1.3% net market basket update) in Medicare payments for 2020 assuming the PDGM is implemented on a budget neutral basis. (10) 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 ~80% of industry, including Encompass Health inpatient rehabilitation sites (11) Represents discharges from 130 consolidated hospitals in Q2 2019; 129 consolidated hospitals in Q1 2019 and Q4 2018; 128 consolidated hospitals in Q3 2018; 127 consolidated hospitals in Q2 2018; and 126 consolidated hospitals in Q1 2018 (12) 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. (13) 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. (14) Represents home health admissions from 220 consolidated locations in Q2 2019; 219 consolidated locations in Q1 2019; 218 consolidated locations in Q4 2018; 214 consolidated locations in Q3 2018; 213 consolidated locations in Q2 2018; and 196 consolidated locations in Q1 2018 (15) Represents hospice admissions from 59 locations in Q2 and Q1 2019; 58 locations in Q4 2018; 57 locations in Q3 2018 and Q2 2018; and 38 locations in Q1 2018 (16) 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. Encompass Health 49