Company: EHC
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000785161-25-000009
Chunk: 150

Company: Encompass Health Corp
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 150
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 our joint venture partner intended to close its acute-care hospital in which our joint venture inpatient rehabilitation hospital was located. We closed that joint venture hospital in February 2024 and incurred a one-time impairment charge of $10.4 million. The impact to Net income attributable to Encompass Health during 2024 resulting from the impairment was $1.8 million after reductions for Net income attributable to noncontrolling interests of $7.3 million and the Provision for income tax expense of $1.3 million.

Supplies

Supplies expense includes all costs associated with supplies used while providing patient care. Specifically, these costs include personal protective equipment (“PPE”), pharmaceuticals, food, syringes, bandages, and other similar items.

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Supplies increased during 2024 compared to 2023 primarily due to higher costs for medical supplies, pharmaceuticals, and food.

General and Administrative Expenses

General and administrative expenses primarily include administrative expenses such as information technology services, human resources, corporate accounting, legal services, and internal audit and controls that are managed from our home office in Birmingham, Alabama. These expenses also include stock-based compensation expenses.

General and administrative expenses increased during 2024 compared to 2023 primarily due to higher salaries, benefits, and software expenses partially offset by lower incentive compensation costs. General and administrative expenses decreased as a percent of Net operating revenues during 2024 compared to 2023 primarily due to higher volumes.

Depreciation and Amortization

Depreciation and amortization increased during 2024 compared to 2023 due to our capital investments throughout 2023 and 2024. Depreciation and amortization in 2023 included $6.1 million related to the accelerated amortization of the remaining carrying value of certificate of need (“CON”) assets in South Carolina. In May 2023, the governor of South Carolina signed into law S.164, which repealed the requirement of certain healthcare providers to obtain and/or maintain a CON.

See “Executive Overview” section of this Item for information related to our development activity. We expect Depreciation and amortization to increase going forward as a result of our recent and ongoing capital investments.

Interest Expense and Amortization of Debt Discounts and Fees

The decrease in Interest expense and amortization of debt discounts and fees in 2024 compared to 2023 primarily resulted from the August and November 2024 redemptions of $150 million and $100 million, respectively, in outstanding principal amount of the 5.75