Encompass Health Reports 9% Revenue Growth and 26% Net Income Increase in Q1 2026

Encompass Health Corporation reported a significant increase in financial performance for the first quarter of 2026, with net operating revenues reaching $1.586 billion, a 9.0% increase from $1.455 billion in the same period of 2025. The company's net income also rose to $248.2 million, up 26.3% from $196.5 million year-over-year. This growth was primarily driven by increased patient volumes and favorable pricing, with a notable rise in Medicare revenues, which accounted for 65.5% of total revenues, compared to 67.0% in the previous year.

Operating expenses for the quarter increased to $1.285 billion, up 8.1% from $1.188 billion in the prior year. Salaries and benefits, which comprised a significant portion of operating expenses, rose by 7.3% to $818.1 million, reflecting both increased staffing levels and wage growth. Other operating expenses also saw an increase, particularly due to higher provider taxes and costs associated with development activities. Despite these rising costs, the company managed to improve its operating margin, with total operating expenses as a percentage of net operating revenues decreasing from 81.7% to 81.0%.

Strategically, Encompass Health has continued to expand its operations, opening a new 49-bed inpatient rehabilitation hospital in Irmo, South Carolina, and adding 44 new beds across existing facilities. The company has also announced plans for several new hospitals, including locations in Pennsylvania, Georgia, and Texas, which are expected to open in 2026 and 2027. As of March 31, 2026, Encompass Health operated 174 inpatient rehabilitation hospitals across 39 states and Puerto Rico, with a total of 11,541 licensed beds.

The company reported a total of 67,763 discharges during the quarter, a 4.3% increase from the previous year, and outpatient visits rose by 9.9% to 21,935. The average length of stay for patients remained stable at 12.1 days. Encompass Health's workforce also grew, with full-time equivalents increasing to 29,944, up 3.4% from 28,947 in the prior year. The company continues to face challenges in recruiting and retaining qualified personnel, which has led to increased labor costs.

Looking ahead, Encompass Health remains optimistic about its growth prospects, driven by demographic trends such as an aging population and an expected increase in Medicare enrollees. The company is focused on maintaining high-quality, cost-effective care while navigating the regulatory landscape and adapting to changes in reimbursement models. Encompass Health's strong financial position, characterized by a well-capitalized balance sheet and significant liquidity, positions it well to capitalize on future growth opportunities.