Company: EHC
Filing Date: 2025-10-31
Form Type: 10-Q
Source: 0000785161-25-000115
Chunk: 64

Company: Encompass Health Corp
Filing Date: 2025-10-31
Form: 10-Q
Item: Part I, Item 1
Chunk 64
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 having an impact on the reimbursement we receive for services provided or the costs of compliance, mandating new documentation standards, requiring additional licensure or certification, regulating our relationships with physicians and other referral sources, regulating the use of our properties, and limiting our ability to enter new markets or add new capacity to existing hospitals. See Item 1, Business, “Regulation,” and Item 1A, Risk Factors, “Reimbursement Risks” and “Other Regulatory Risks” of the 2024 Form 10‑K for detailed discussions of the most important regulations we face and our programs intended to ensure we comply with those regulations.

•Changes in Medicare Reimbursement and Regulatory Requirements for Operating IRFs. On August 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) released its notice of final rulemaking for fiscal year 2026 for IRFs (the “2026 Final IRF Rule”) under the inpatient rehabilitation facility prospective payment system. The 2026 Final IRF Rule will implement a net 2.6% market basket increase (market basket update of 3.3% reduced by a productivity adjustment of 0.7%) effective for discharges between October 1, 2025 and September 30, 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 OBB