Company: EHC
Filing Date: 2025-10-31
Form Type: 10-Q
Source: 0000785161-25-000115
Chunk: 4

Company: Encompass Health Corp
Filing Date: 2025-10-31
Form: 10-Q
Item: Part I, Item 2
Chunk 4
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2026. The 2026 Final IRF Rule also includes changes that impact our hospital-by-hospital base rate for Medicare reimbursement. Such changes include, but are not limited to, revisions to the wage index, updates to outlier payments, and updates to the case-mix group relative weights and average lengths of stay values. Based on our analysis that utilizes the acuity of our patients annualized over a twelve-month period ended June 30, 2025, our experience with outlier payments over this same time frame, and other factors, we believe the 2026 Final IRF Rule will result in a net increase to our Medicare payment rates of approximately 2.9% effective October 1, 2025.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA contains a range of healthcare-related provisions impacting coverage, financing, and provider reimbursement in state Medicaid programs. These provisions include enrollee work requirements, limitations on states’ ability to assess provider taxes, and limitations on states’ directed payments to providers. Most of these provisions take effect in 2027 or later and will likely require additional federal and state regulatory action to implement. We are currently evaluating these OBBBA provisions and will evaluate any related federal and state regulatory action as it develops. The OBBBA includes other non-healthcare specific, tax-related items. For further discussion of these items, see Note 9, Income Taxes, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report and the “Results of Operations” section of this Item.

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In August 2023, IRFs located in Alabama began participation in CMS’s review choice demonstration (“RCD”), under which Medicare reimbursement claims are assessed for compliance with applicable coverage and clinical documentation requirements. On March 1, 2024, CMS announced the expansion of RCD, effective June 17, 2024, to include IRFs located in Pennsylvania and billing to a certain Medicare Administrative Contractor (“MAC”). We do not bill to this MAC, so we are not subject to RCD in Pennsylvania at this time. CMS plans to expand RCD further to Texas and California, but the timing for doing so is not known. We operate 48 inpatient rehabilitation hospitals (representing approximately 29% of our IRF Medicare claims) in the four RCD states. CMS intends to expand the RCD program after these initial four state rollouts but