Company: EHC
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000785161-25-000009
Chunk: 149

Company: Encompass Health Corp
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 149
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 to appeals pending before the Departmental Appeals Board and various federal district courts. For additional details on this reserve, see Item 1A, Risk Factors, “Reimbursement Risks,” and Note 1, Summary of Significant Accounting Policies, “Net Operating Revenues,” to the accompanying consolidated financial statements.

The increase in outpatient and other revenue during 2024 included an increase of $33.8 million in provider tax revenues (partially offset by an increase of $17.6 million in provider tax expenses included in Other operating expenses). Provider tax revenues represent amounts received under state directed and supplemental payment programs associated with Medicaid. See Item 1, Business, “Medicaid Reimbursement,” for additional information.

Salaries and Benefits

Salaries and benefits are the most significant cost to us and represent an investment in our most important asset: our employees. Salaries and benefits include all amounts paid to full- and part-time employees who directly participate in or support the operations of our hospitals, including all related costs of benefits provided to employees. It also includes amounts paid for contract labor.

Salaries and benefits increased in 2024 compared to 2023 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of FTEs as a result of our development activities. Salaries and benefits decreased as a percent of Net operating revenues during 2024 compared to 2023 primarily due to higher volumes and provider tax revenues and lower revenue reserves related to bad debt as discussed above.

In order to meet our clinical staffing needs, we have continued to utilize third-party agencies and to pay sign-on and shift bonuses to our employees. While the costs associated with these actions have declined compared to the prior year, future costs will be affected by labor market conditions and other factors.

Other Operating Expenses

Other operating expenses include costs associated with managing and maintaining our hospitals. These expenses include such items as contract services, non-income related taxes, professional fees, utilities, insurance, and repairs and maintenance.

Other operating expenses increased during 2024 compared to 2023 primarily due to higher costs resulting from our development activities and increased provider tax expense as discussed above. Other operating expenses decreased as a percent of Net operating revenues during 2024 compared to 2023 primarily due to higher volumes.

Other operating expenses during 2024 included a $10.4 million impairment charge related to the closure of our joint venture inpatient rehabilitation hospital in Eau Claire, Wisconsin. In January 2024, we received notice that