Encompass Health

None of the warning signs we check for were found.

We look for five warning signs: doubt it can keep going, weak checks on its own accounts, a notice that its past accounts can't be relied on, a change of auditor, and one customer bringing in a big share of sales. We don't check lawsuits, investigations or debt yet.

We checked the auditor's report, internal controls, restatement notices, auditor changes and big customers in the 10-K filed 26 Feb 2026, plus the 10-Q filed 7 Aug 2026 and 7 later 8-Ks.

Cheap for a reason is the question the numbers cannot answer.

Whether the price already reflects the risks is what the deep dive is for.

• Reductions or changes in reimbursement from government or third-party payors could adversely affect our Net operating revenues and other operating results.

  Could happen

  We receive state directed and supplemental payments in connection with several state Medicaid programs. In 2025, those payments totaled approximately $148 million. We also pay provider taxes to fund, in part, state Medicaid programs, and in 2025 those payments totaled approximately $127 million. In May 2024, CMS issued a final rule related to Medicaid managed care programs that addresses state directed payment programs and imposes new requirements for these programs. The various elements of the rule take effect between its issuance and early 2028. Ultimately, this rule could result in significant changes to state directed and supplemental payment programs from which we receive payments. However, a federal district court recently vacated portions of this rule following a legal challenge by the state of Texas. CMS appealed the decision, but the court enjoined enforcement of this rule while the appeal is pending. The OBBBA also contains provisions limiting states’ ability to assess provider taxes to increase federal matching Medicaid funds and make directed payments to providers. Most of these provisions take effect in 2027 or later and likely require additional federal and state regulatory action to implement.

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• Reductions or changes in reimbursement from government or third-party payors could adversely affect our Net operating revenues and other operating results.

  Could happen

  It is possible that additional rulemaking could result in significant restructurings of existing state Medicaid programs, including provider tax and related directed and supplemental payment programs. State authorities design the structures and operations of these programs to promote access to acute-care hospitals for Medicaid patients by supplementing acute-care reimbursement. Historically, we are not aware of any IRFs playing a significant role in the design given the limited number of IRF Medicaid patients, so we are uncertain what attention state authorities will give to the effects of additional rulemaking on IRFs. We are unable to estimate the financial impact that structural modifications and other program changes, if any, may have on our Medicaid provider tax expenses or directed and supplemental payments. We cannot be certain that changes to state directed and supplemental payment programs will directly correspond to changes in the related provider taxes. CMS periodically assesses the compliance of these programs, and CMS’s determination that a state’s program fails to comply may result in a decrease in state directed and supplemental payments and recoupment of prior payments under that state’s noncompliant program.

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• Efforts to reduce payments to healthcare providers undertaken by third-party payors, conveners, and referral sources could adversely affect our revenues and profitability.

  Could happen

  Medicare Advantage plans may use overly restrictive coverage determinations in the pre-authorization process to limit participating members’ access to needed inpatient rehabilitative care. Medicare Advantage plans must provide coverage for inpatient rehabilitative care to the extent conventional Medicare does. However, in our experience, Medicare Advantage plans frequently deny coverage for inpatient rehabilitative care when the patients would have qualified for that care under conventional Medicare rules. Additionally, large Medicare Advantage plans have acquired home health operators. Those Medicare Advantage plans may attempt to shift patients who would benefit from intensive inpatient rehabilitation to home health in order to reduce costs to the plans in the near term.

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