Investor Reference Book                                 Post Q1 2019 earnings release                                Last updated May 13, 2019   HealthSouth is a leading provider of post-acute healthcare services, offering both facility-based  and home-based post-acute services in 34 states and Puerto Rico through its network of  inpatient rehabilitation hospitals, home health agencies, and hospice agencies.
 Forward-looking statements The information contained in this Investor Reference Book includes certain estimates, projections and other forward- looking information that reflect Encompass Health’s current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, a potential settlement of the pending DOJ investigation, capital expenditures, acquisition and other development activities, cyber security, dividend strategies, repurchases of securities, effective tax rates, financial performance, financial assumptions, business model, balance sheet and cash flow plans, disintermediation, and shareholder value-enhancing transactions. These estimates, projections and other forward-looking information are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual events or results, and those differences may be material. There can be no assurance any estimates, projections or forward-looking information will be realized. All such estimates, projections and forward-looking information speak only as of the date hereof. Encompass Health undertakes no duty to publicly update or revise the information contained herein. You are cautioned not to place undue reliance on the estimates, projections and other forward-looking information in this Investor Reference Book as they are based on current expectations and general assumptions and are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the year ended December 31, 2018, the Form 10-Q for the quarter ended March 31, 2019, and in other documents Encompass Health previously filed with the SEC, many of which are beyond Encompass Health’s control, that may cause actual events or results to differ materially from the views, beliefs, and estimates expressed herein. Note regarding presentation of non-GAAP financial measures The following Investor Reference Book includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA, leverage ratios, adjusted earnings per share, and adjusted free cash flow. Schedules are attached that reconcile the non-GAAP financial measures included in the following Investor Reference Book to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. The Company’s Form 8-K, dated May 13, 2019, to which the following Investor Reference Book is attached as Exhibit 99.1, provides further explanation and disclosure regarding Encompass Health’s use of non-GAAP financial measures and should be read in conjunction with this Investor Reference Book.  Encompass Health                                                                                       2
 Table of contents      Company overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-17      Investment thesis and strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-25      Business outlook, including guidance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-44      Growth  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-56      Alternative payment models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57-59      Capital structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60-65      Information technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66-69      Operational metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70-76      Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77-88      Segment operating results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89-93      Reconciliations to GAAP and share information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94-103      End notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104-107   Encompass Health                                                                              3
 Company overview   Encompass Health is a national leader in integrated healthcare services   offering both facility-based and home-based patient care through its network of inpatient rehabilitation hospitals, home health agencies, and  hospice agencies. The Company is committed to delivering high-quality,     cost-effective, integrated care across the healthcare continuum.   Encompass Health                                               4
 Encompass Health                     a national leader in integrated                                      healthcare services                                                                                          Market overlap                                                                                   81 of EHC’s IRFs have an                                                                                  EHC home health location                                                                                   within the service area.*                                                                               Portfolio as of March 31, 2019                                                                            Inpatient rehabilitation hospitals (“IRFs”)                                                                            Home health locations                                                                            Hospice locations                                                                            6 Future IRFs**                                                                         37 States and Puerto Rico  ~41,100 employees    Inpatient rehabilitation - 03/31/19                                     Home health and hospice - 03/31/19      130  IRFs (45 are joint ventures)                                       221   Home health locations       32  States and Puerto Rico               Largest owner and              59   Hospice locations  ~30,300  Employees                             operator of IRFs              31   States      22%  of licensed beds†                                               ~10,800  Employees      30%  of Medicare patients served†      4th Largest provider of           Key statistics - trailing 4 quarters      Key statistics - trailing 4 quarters  Medicare-certified skilled     141,485  Home health admissions                                              home health services  180,347  Inpatient discharges                                              8,259  Hospice admissions    ~$3.4  Billion in revenue                                               ~$979   Million in revenue                                                                                           †                 * Excluding markets that have home health licensure barriers  ** Previously announced under development   Based on 2017 data Encompass Health             Note: One of the 130 IRFs and two of the 221 home health locations are nonconsolidated. 5                                            These locations are accounted for using the equity method of accounting.
 Company overview                inpatient rehabilitation                                          115 of the Company’s IRFs hold one or more disease-specific     Inpatient rehabilitation            certifications from The Joint Commission’s Disease-Specific     hospitals                           Care Certification Program.(1)   Major services  • Rehabilitation physicians: manage and treat medical conditions and oversee rehabilitation program • Rehabilitation nurses: provide personal care and oversee treatment plan for patients • Physical therapists: address physical function, mobility, strength, balance, and safety • Occupational therapists: promote independence through Activities of Daily Living • Speech-language therapists: address speech/voice functions, swallowing, memory/cognition, and language/   communication • Respiratory therapists: provide assessment and treatment of patients with both acute and chronic dysfunction   of the cardioplumonary system • Case managers: coordinate care plan with physician, Care Transition Coordinators, caregivers and family • Post-discharge services: outpatient therapy and home health   Encompass Health                     Refer to pages 105-107 for end notes.                    6
 Company overview              home health and hospice                                      The Company offers evidence-based specialty programs      Home health agencies            related to: post-operative care, fall prevention, chronic disease                                     management, and transitional care.    Major services   • Skilled nurses: comprehensively assess, teach, train, and manage care related to injury or illness  • Home health aides: provide personal care and assistance with Activities of Daily Living  • Physical therapists: address physical function, mobility, strength, balance, and safety  • Occupational therapists: promote independence through training on self-management of ADLs  • Speech-language therapists: address speech/voice functions, swallowing, memory/cognition, and    language/communication  • Medical social workers: provide assessment of social and emotional factors; assist with obtaining    community resources Hospice: provides services to terminally ill patients and their families to address patients’ physical needs, including pain control and symptom management, and also provides emotional and spiritual support.   Encompass Health                                                                       7
 IRF patient mix                                        Home health patient mix                       Admission sources:                                                 Admission sources:                   Acute care hospitals – 90%                                        Acute care hospitals – 36%              Physician offices / community – 8%                                Physician offices / community – 37%                  Skilled nursing facilities – 2%                                     IRFs / LTCHs / SNFs – 27%    Rehabilitation impairment category           Q1-19     2018           Demographics of all Medicare home health users*: RIC 01    Stroke                                 18.2%     18.0%      100 RIC 02/03 Brain dysfunction                      10.2%     10.3%       90 RIC 04/05 Spinal cord dysfunction                 3.8%      3.8%       80                                                                       e 70 RIC 06    Neurological conditions                22.0%     21.0%     g                                                                      a                                                                      t 60 RIC 07    Fracture of lower extremity             7.5%      7.7%     n                                                                      e                                                                       c 50 RIC 08    Replacement of lower extremity joint    3.2%      3.9%     r                                             85.9%                                                                      e  RIC 09    Other orthopedic                        8.5%      9.0%     P 40 RIC 10/11 Amputation                              2.7%      2.6%       30                                                                                            36.4%       32.9% RIC 14    Cardiac                                 4.5%      4.5%       20      24.5% RIC 17/18 Major multiple trauma                   5.1%      5.3%       10 RIC 20    Other disabling impairments            11.3%     11.1%              Age 85+       Lives     Has 2 or    Has 3 or                                                                                              alone     more ADL  more chronic   —       All other RICs                          3.0%      2.8%                                                                                                      limitations  conditions          Average age of the Company’s IRF patients:                   Average age of the Company’s home health patients:              all patients = 71    Medicare FFS = 76                             all patients = 76    Medicare FFS = 77                      Admission to an IRF:                                            Admission to home health:  •  Physicians and acute care hospital case managers are key        •  For Medicare, a patient must be confined to the home and need     decision makers for post-acute services.                           skilled services.  •  All IRF patients must meet reasonable and necessary criteria    •  The patient must be under the care of a physician and receive     and must be admitted by a physician.                               services under a home health plan of care established and                                                                        periodically reviewed by a physician.  •  All IRF patients must be medically stable and have potential to     tolerate three hours of therapy per day (minimum).              •  Medicare also requires a face-to-face encounter related to the                                                                        primary reason the patient requires home health services with a  •  IRF patients receive 24-hour, 7 days a week nursing care.          physician or an allowed non-physician practitioner.    Encompass Health            * Source: Avalere Health and Alliance for Home Health Quality and Innovation Home Health Chart Book 2018 8
 High-quality care                    IRF quality                                    Home health quality         Discharge to community                                                                     3.8       79.4%    79.9%    79.3%     Percent of cases                                     discharged to                                  Quality of care            76.7%    76.3%   76.0%                            the community,                                   Star ratings(3)                                    including home                                                            3.3                96% of our home health agencies                                     or home with                                     home health.                                   are 3 Stars or higher;                                                                                       are  Stars or higher      2017    2018     Q1-19        Higher is better.                             50%    4        Discharge to skilled nursing                                        Percent of   12.7%    12.3%    12.3%                                                        Patient satisfaction                                        patients             3.5     4.1              Star ratings(3)       9.3%     9.1%      9.3%      discharged to a                                                                               97% of our home health agencies                                    skilled nursing                                                                                    are 3 Stars or higher;                                       facility.                                     Lower is better.                              88% are 4 Stars or higher     2017     2018     Q1-19        Discharge to acute hospital                                140 bps better                                       Percent of            17.2%                       30-Day                          10.8%         patients       10.7%         10.7%                                                         Readmission rate*   10.4%        10.4%              discharged to an                 15.8%            10.2%                     acute care                                    Percent of patients                                       hospital.                               readmitted to an acute care                                    Lower is better.                             hospital. Lower is better.     2017     2018     Q1-19             UDSMR(2)                  Encompass Health        National average      Encompass Health  Encompass Health                              Refer to pages 105-107 for end notes.                    9                   * Source for National Average: Avalere Health and Alliance for Home Health Quality and Innovation Home Health Chart Book 2018
 Leading position in cost effectiveness                              inpatient rehabilitation                                                                                Avg. est.                                                                 Avg. est.      total                                             Avg.                total cost   payment          Medicare pays                                  Avg.     Medicare     Case        per          per           Encompass Health                                  beds    discharges    mix      discharge    discharge        less per discharge,                          #      per IRF   per IRF(5)  index(6) for FY 2019  for FY 2019                                                                                               on average, and      Encompass       Health(4) =       126        67        951       1.28      $13,622     $20,315           Encompass Health                                                                                               treats a higher    Free-standing =                                                                             acuity patient. (Non-Encompass Health) 154        58        589       1.27      $18,107     $21,400                                                                                              The Company differentiates                                                                                            itself by:                                                                                                    Hospital                                                                                 “Best Practices” clinical       units =          846        24        228       1.22      $21,483     $21,569            protocols                                                                                               Supply chain efficiencies                                                                                               Sophisticated                                                                                                management information                                                                                                systems                                                                                               Economies of scale        Total(7)       1,126       34        358       1.25      $18,388     $21,159                                                                                                       (8)    Encompass Health    The average estimated total payment per discharge, as stated, does not reflect a 2% reduction for sequestration. 10                                                   Refer to pages 105-107 for end notes.
 Low cost leader          home health                                                                               Average revenue per                                                                              episode is 3.5%                                                     Average                              Average     Average    revenue                  higher than the peer                    2018      revenue      visits    per visit    Cost        average primarily                  Episodes   per episode per episode (all payors) per visit   due to higher acuity   Encompass                                                                  patient mix.     Health       243,698     $2,968       17.6       $162        $76                                                                              Cost per visit is 11.6%                                                                              lower due to market                                                                              density and operational                                                                              efficiency:                                                                                 Public peer                                                                  Caregiver    average       315,713     $2,869       17.9       $145        $86             optimization                                                                               Optimization of HCHB                                                                               Employee culture of                                                                                 excellence                                                                               ~75% of visits                                                                                   conducted by full- Comparison to                               3.5%       (1.7)%     11.7%      (11.6)%           time staff  peer average                                                                 Daily monitoring of                                                                                   productivity                    Public peer average represents 2018 data from publicly traded home health providers.     Encompass Health                                                                              11
 New-store/same-store growth                                                Inpatient Rehabilitation              25.0                                                                                  Shelby County, AL (34 beds)                                                                                    Bluffton, SC (38 beds)            20.0                           Bryan, TX (49 beds)                       Broken Arrow, OK (22 beds)                              Pearland, TX                                                                                 (40 beds)            15.0                              Gulfport, MS (33 beds)                                     Murrells Inlet,                                            Westerville, OH (60 beds)                                     SC (29 beds)             10.0                                                  Jackson, TN                                        Winston-Salem,                                                                    (48 beds)                                         Modesto, CA                                                                  NC (68 beds)                                           (50 beds)             5.0               0.0   Discharges      Q2Q2 20162016 Q3Q3 20162016 Q4Q4 20162016 Q1Q1 20172017 Q2Q2 20172017 Q3Q3 20172017 Q4Q4 20172017 Q1Q1 20182018 QQ22 22018018 QQ33 22018018 QQ44 22018018 QQ11 22019019   New store         11.7%     10.7%      1.3%      1.2%       1.9%      2.4%       2.0%      1.9%      1.6%       1.0%      1.7%       1.3%   Same store        1.9%       1.9%      0.1%      1.6%       1.6%      1.4%       3.9%      4.8%      3.6%       2.0%      1.9%      (0.2)%   Total by qtr.     13.6%     12.6%      1.4%      2.8%       3.5%      3.8%       5.9%      6.7%      5.2%       3.0%      3.6%       1.1%   Total by year                         10.8%                                      4.0%                                     4.6%   Same-store   year*                                  1.7%                                      1.8%                                     2.8%   Same-store   year UDS(2)                           (0.6)%                                    (0.5)%                                    1.1%                                     * Includes consolidated inpatient rehabilitation hospitals classified as same store during each period Encompass Health                                                                                                                             12                                                              Refer to pages 105-107 for end notes.
 New-store/same-store growth                                                Home Health                                  Acquired CareSouth             60.0       (44 home health locations in 7 states)                                  in November 2015             50.0             40.0             30.0                                                             Acquired Camellia Healthcare                                                                         (14 home health locations in 3 states)                                                                                       in May 2018            20.0             10.0              0.0  Admissions        QQ22 2 2016016 QQ33  22016016 QQ44  22016016 QQ11  22017017 QQ22  22017017 QQ33  22017017 QQ44 22017017 QQ11 22018018 QQ22 22018018 QQ33 22018018 Q4Q4 20182018 Q1Q1 20192019  New store           41.6%     35.4%      8.1%      5.7%       6.4%      6.7%       3.5%      2.5%      5.3%       5.4%      5.3%       5.7%  Same store*         11.1%     15.3%     14.0%      13.9%     13.3%      8.8%      10.1%      7.4%      5.1%       3.8%      5.4%       6.4%  Total by quarter    52.7%     50.7%     22.1%      19.6%     19.7%      15.5%     13.6%      9.9%      10.4%      9.2%      10.7%     12.1%  Total by year                           43.6%                                     17.0%                                     10.0%  Same-store year*                        13.7%                                     11.4%                                     5.6%                         u   In 2016, the Company acquired or opened 10 home health locations.                         u   In 2017, the Company acquired or opened 15 home health locations.                         u   In 2018, the Company acquired or opened 23 home health locations.                         u   In 2019, the Company acquired or opened 2 home health locations.  Encompass Health                      * Includes consolidated home health agencies classified as same store during each period               13
 Payors (Q1 2019)        Payor source                    % of Revenues                         Payment methodology                                                                     Prospective Payment System (“PPS”)                                                                       - IRF: paid per discharge by Case Mix Group (“CMG”)                                                    Home               - Home health: paid per 60-day episode of care by   Medicare                       Inpatient                                Home Health Resource Group                                                  health &                                  rehab                                 •  An episode is paid in two installments:                                                    hospice                                segment                                    1) Request for anticipated payment                                                  segment                  2) Final bill after episode is complete                                                                      Per diem/visit or CMG/episodes Medicare Advantage              73.5%             84.6%               - Negotiated rate                                                                       - Some are “tiered” for acuity/severity                                                                      Per diem/visit or CMG/episodes Managed care                                                          - Negotiated rate                                                                       - Some are “tiered” for acuity/severity  Medicaid                                                            Varies by state                                   9.8%                                    9.6%                                                    10.0%                                   3.0%                                 Variety of methodologies Other                                               3.3%                                   4.1%                           1.7%                                                              0.4%     Encompass Health                                                                                                14
 Independent research concludes IRFs are a better      rehabilitation option for stroke patients than SNFs                                                            “Whenever possible, the American Stroke Association                                                          strongly recommends that stroke patients be treated                                                           at an inpatient rehabilitation facility rather than a                                                                      skilled nursing facility. While in                                                            an inpatient rehabilitation facility, a patient participates in at                                                         least three hours of rehabilitation a day from physical therapists,                                                            occupational therapists, and speech therapists. Nurses are                                                             continuously available and doctors typically visit daily.”*                                                                   “If the hospital suggests sending your loved one to                                                                 a skilled nursing facility after a stroke, advocate                                                                    for the patient to go to an inpatient                                                                      rehabilitation facility instead...”*                                                         “The studies that have compared outcomes in hospitalized stroke                                                       patients first discharged to an IRF, a SNF, or a nursing home have                                                     generally shown that IRF patients have higher rates of return                                                       to community living and greater functional recovery,  113 of the Company’s IRFs hold The Joint           whereas patients discharged to a SNF or a nursing home have higher     Commission’s Disease-Specific Care                  rehospitalization rates and substantially poorer survival.”**    Certification in stroke rehabilitation.                             * AHA/ASA press release, “Inpatient rehab recommended over nursing homes for stroke rehab,”  Encompass Health            issued May 4, 2016 (newsroom.heart.org)                                             15                           ** “Guidelines for Adult Stroke Rehabilitation and Recovery,” issued May 2016 (stroke.ahajournals.org)
 Strong and sustainable business fundamentals                                 • Favorable demographic trends driving increased demand                                • Nondiscretionary nature of many conditions treated  Attractive healthcare sectors                                • Highly fragmented post-acute sectors present acquisition and joint                                  venture opportunities                                • Largest provider of inpatient rehabilitation services                                • 4th largest provider of Medicare-certified skilled home health services                                • Top 20 provider of hospice services  Industry leading positions    • Consistent delivery of high-quality, cost-effective, integrated facility-                                  based and home-based care                                • Enhanced utilization of technology (e.g., clinical, data management,                                  and technology-enabled business processes)                                • Effective labor management  Cost-effectiveness            • Efficient supply chain                                • Economies related to scale and market density                                 • Portfolio of 130* IRFs as of March 31, 2019  Real estate ownership                                    P 90 owned and 40 leased                                 • Strong balance sheet and liquidity, no significant near-term maturities  Financial strength              (credit agreement matures in 2022; bonds mature in 2023 and beyond)                                • Substantial free cash flow generation                                 • Attractive organic growth opportunities in both segments                                 • Flexible inpatient rehabilitation de novo and acquisition strategy  Growth opportunities                                • Home health and hospice platform with track record of growth through                                  acquisitions  Encompass Health                     * Includes one nonconsolidated entity.                   16
 Proven track record                                                                 Period            Adjusted EBITDA % change history                                                                ending      R                                                    MMSEA* final                                                                Q1-09       E                                                   establishment                                                                 Q2-09                                                                            C                                                   of IRF 60% Rule                                                                Q3-09       E                                                                Q4-09       S                                                                Q1-10       S                                               Medicare price rollback                                                                Q2-10       I                                                and 18-month freeze                                                                Q3-10       O                                                                Q4-10       N                                                                Q1-11                                                                Q2-11                                                       1st Medicare IRF price          We have posted                                        Q3-11                                                         increase since 2007                                                                Q4-11                                                                Q1-12         a year-over-year                                       Q2-12                                                       CMS implemented new                                                                Q3-12                                                      coverage criteria for IRF                                                                Q4-12                                                             admissions               increase in                                      Q1-13                                                                Q2-13                                                                Q3-13                                                       Patient Protection and                                                                Q4-13                                                         Affordable Care Act      Adjusted EBITDA in                                        Q1-14                                                          (PPACA) of 2010                                                                 Q2-14                                                           signed into law                                                                Q3-14           40 of the last                                       Q4-14                                                                Q1-15                                                         IRF price increase:                                                                 Q2-15                                                       less PPACA adjustment             41 quarters                                        Q3-15                                                                Q4-15                                                                Q1-16        despite numerous                                        Q2-16                                                                Q3-16                                                                Q4-16                                                        Sequestration began               challenges.                                      Q1-17                                                                Q2-17                                                                Q3-17                                                                Q4-17                                                            Home Health                                                                 Q1-18                                                                Q2-18                                                         rebasing cuts began                                                                Q3-18                                                                Q4-18                                                                Q1-19                                                                        -5       0       5      10       15      20      25      30      35      40                                                                                               Year-over-year percent change  Encompass Health                     * Medicare, Medicaid, and State Children's Health Insurance Program Extension Act of 2007               17
 Investment thesis                           and strategy       Encompass Health’s ability to adapt to changes, build strategic  relationships, and consistently provide high-quality, cost-effective care  positions the Company for success in the evolving healthcare industry.   Encompass Health                                               18
 Investment thesis     Encompass Health is positioned to become the nation's leading provider of integrated post-acute services.     The healthcare industry is evolving toward integrated delivery models and value-based care.     Providers must be able to adapt to changes, build strategic relationships across the healthcare          continuum, and consistently provide high-quality, cost-effective care to be successful.                                      Demonstrated ability to adapt across economic cycles and in the face of numerous               Change agility        and significant regulatory and legislative changes                                      Joint ventures with acute-care partners comprise one-third of IRF portfolio.                                     Formed Post-Acute Innovation Center in collaboration with Cerner Corporation to               Strategic             develop enhanced tools to manage patients across the continuum of care               relationships                                     Formed a strategic partnership with the American Heart Association/American                                     Stroke Association to jointly work to elevate national and local awareness that                                     stroke is treatable and beatable through rehabilitation and community support                Quality of                                      Outcomes in both operating segments exceed national industry standards.               patient outcomes                Cost                  Treatment of more medically complex patients at lower average costs than other                                     post-acute providers through superior clinical protocols, economies of scale, and               effectiveness         technology-enabled business processes                                      Both of the Company's segments benefit from favorable demographic trends and the               Growth                nondiscretionary nature of many conditions treated.    Encompass Health                                                                                                19
 Strategy       The Company’s strategy is to expand its network of inpatient rehabilitation   hospitals and home health and hospice locations, further strengthen its relationships  with healthcare systems, provider networks, and payors in order to connect patient       care across the healthcare continuum, and to deliver superior outcomes.                               Elements of strategy    Clinical expertise Financial    Advanced  and high-quality                               Sustained    Post-acute      outcomes      resources     technology       growth       solutions   Encompass Health                                                       20
 Elements of strategy                           Institutional programs and advanced treatment protocols connect care and allow                          seamless transition of patients across the healthcare continuum            Clinical      Leverage technology to strengthen clinical data analytics            expertise             and           Integration of care transition coordinators            high-quality            outcomes      115 Encompass Health inpatient rehabilitation hospitals hold one or more disease-                          specific certifications, including 113 with stroke-specific certifications                          Outcomes in both operating segments exceed national industry standards (see page 9)            Financial     Strong, well-capitalized balance sheet            resources     Free cash flow funds growth and shareholder distributions                          Proprietary rehabilitation-specific clinical information system (known as "ACE-IT")            Advanced            technology    Proprietary management reporting system (known as "Beacon")                          Optimization of Homecare Homebase                          Highly fragmented sectors present acquisition and joint venture growth opportunities            Sustained     Technology-facilitated and data-driven sales processes            growth                          Barriers to entry include capital investments, clinical expertise, regulatory compliance,                          and Certificate of Need (“CON”) requirements                          Predictive analytics used to enhance patient outcomes (e.g., ReACT; Sepsis Alert; 90-day                          post-acute readmission prediction model)            Post-acute            solutions     Ongoing innovation with initiatives such as the Post-Acute Innovation Center                          Active participant in various alternative payment models   Encompass Health                                                                                      21
 The healthcare landscape is changing.     Current post-acute providers                     Future post-acute providers  • Medicare payments/regulations are site         • Medicare payments/regulations will be  specific (e.g., 60% Rule, 3-Hour Rule,            outcome focused.  “preponderance” of one-to-one therapy).         • Many existing regulations will become                             •  Integrated delivery unnecessary.                              payment models     Long-term acute care hospitals • Value-based Facility-based post acute services                              payments            • Full range: low acuity à high acuity                                                  • 24/7 nursing coverage    Inpatient rehabilitation hospitals • Site neutrality • Eliminates payment silos        Skilled nursing facilities                 Home-based post-acute services                                                  • More care in the home (lowest cost setting)                                                  • Ability to care for high-acuity patients with           Home health                              multiple chronic conditions   ▪ The healthcare industry is moving toward integrated delivery payment models,    value-based purchasing, and site neutrality. A new payment system for LTCHs,    pending new payment systems for SNFs and HHAs, and pending changes to the IRF    functional assessment framework are precursors to these moves.  ▪ To succeed, providers must adapt to changes in the regulatory and operating    environments, build strategic relationships across the healthcare continuum, and    consistently provide high-quality care at a cost-effective price.    Encompass Health                                                       22
 The Company is well-positioned for the progression towards site neutrality as it will   be able to treat all types of post-acute patients by leveraging its operational expertise   across its network of facility-based and home-based assets.                     The Company’s IRFs have the physical construct, clinical staffing,                    and operating expertise to “pivot from the center” to address the full                    spectrum of inpatient post-acute needs in a site neutral environment.                LTACs             IRFs              SNFs              Always available                                                                      Sometimes available                                                                      Seldom available         Therapy gym       Therapy gym        Therapy gym   Present & training      & training        & training                                                                     Home health         Systems for       Systems for       Systems for          all PAC           all PAC           all PAC         patients           patients          patients         Staff trained     Staff trained      Staff trained        for all acuity    for all acuity     for all acuity                                                                                                   Progression to site neutrality                                                                   Higher acuity patients will                         Post-acute inpatient hospitals           transition from post-acute                                                                   inpatient hospitals to                                                                  home health. Lower acuity   Future                      Post-acute inpatient spectrum               patients will go directly to                                                                      home health.      Higher acuity                                 Lower acuity  Encompass Health                                                                23
 The Company continues to improve the patient experience and outcomes through integrated care delivery.                 Inpatient rehabilitation–home health clinical collaboration (all payors)                                               overlap markets*                                                                 33.5%                  36.0%                                                              Collaboration rate     Collaboration rate     u As of March 31, 2019, Encompass Health had 81       overlap markets.*     u       The clinical collaboration rate with Encompass            5,409                   5,830       Health’s inpatient rehabilitation hospitals increased       250 basis points in Q1 2019 compared to Q1 2018.     u The clinical collaboration rate objective is 40% in       the near term.     u The objectives of clinical collaboration are to       improve the patient experience and outcomes and       to reduce the total cost of care across a post-acute       episode.                                                  10,726                 10,348         Coordination between our IRFs and home health          teams is resulting in lower discharges to skilled          nursing facilities, higher discharges to home and          improved patient satisfaction.                                                                 Q1  2018               Q1  2019                                                                              Encompass Health home                                                               Encompass     health                                                               Health IRF                                                            discharges to:   Non-Encompass Health                                                                             home health                          * Overlap markets have an Encompass Health IRF and an Encompass Health home health location within an  Encompass Health        approximate 30-mile radius, excluding markets that have home health licensure barriers. Overlap 24                          markets are open for 12 months before inclusion in the clinical collaboration rate.
 Clinical collaboration - all markets To continue building its clinical collaboration platform, the Company will:    •  focus on increasing its number of new overlap markets and building density in current overlap markets and    •  use Care Transition Coordinators and TeamWorks best practices to enhance patient awareness and       understanding of the value in clinical collaboration.                                                                              Priorities                         24%     ~107,000                                                              Requires acquisition                                                                             to be actionable;        EHC IRF                                                           pipeline prioritization      discharges     Non-Medicare        10%                     FFS discharges                                            underway      referred to     home health                      Discharges in        4%                      EHC's current  markets where     Discharges        in 2018                                                                           Clinical                        clinical                      returning to a                                     a JV acute care                                   collaboration                      collaboration  partner owns a   non-EHC home        26%                     focus is on the                                                     activities                                      home health     health agency                      underway        ~59%            Medicare     agency outside   that referred        of total       beneficiary    of the EHC JV   the patient to                      population.        EHC IRF                                        an EHC IRF      Discharges in      discharges                                                      markets where       15%                                                                       EHC operates                                                                      an IRF but not                                                                                      Discharges to a                                                                      a home health                                                                                      non-EHC home                                                                         agency                                                                                      health agency       21%                                                                                        in an EHC                                                                                      overlap market                                                                                                       Discharges to                                                                                                       an EHC home                                                                                                       health agency     Encompass Health                                                                                                25
 Business outlook, including guidance                (as of May 13, 2019)    Encompass Health                        26
 Priorities for 2019                GROWTH                u  Expand portfolio of inpatient rehabilitation hospitals                                        Demographic trends driving increased demand for inpatient rehabilitation services                    IRFs are best positioned to expand service offering in the progression towards site                     neutrality (see page 23)                                        Joint venture or wholly owned opportunities based on market-specific dynamics                                        Increase capacity at existing IRFs via bed additions                u  Expand portfolio of home health and hospice locations                    Demographic trends driving increased demand for skilled home health services                     and in-home hospice services                                        Home health benefiting from SNF disintermediation                                        Continue emphasis on:                     ü                        Increasing overlap with the Company’s inpatient rehabilitation hospitals                     ü  Increasing market density via acquisitions in existing and contiguous home                        health markets                    Continue to build scale in hospice service line                 OPERATIONAL INITIATIVES                 CAPITAL STRUCTURE   Encompass Health                                                                              27
 Priorities for 2019          GROWTH          OPERATIONAL INITIATIVES         u Increase clinical collaboration - see pages 24 and 25         u Build stroke market share - see page 29         u Develop and implement post-acute solutions - see page 30         u Transition to IRF CARE Tool payment system - see page 31         u Prepare for implementation of home health:              Patient-Driven Groupings Model (PDGM) - see page 32             Review Choice Demonstration (RCD) - see page 33          CAPITAL STRUCTURE         u Maintain real estate ownership and balance sheet flexibility         u Consider opportunistic refinancings         u Augment returns from investments in operations with shareholder distributions   Encompass Health                                                                28
 Building stroke market share   Leveraging our:    • strategic sponsorship with the AHA/ASA    • clinical collaboration    • joint commission certifications  ~800,000    strokes                ~142,000          113 EHC IRFs     per year               deaths from stroke hold stroke-specific     in the U.S.                              certifications.                            ~32,000           Continue to increase market                           strokes treated in                            EHC IRFs          share by focusing on IRF- eligible                                             stroke patients going to SNFs                 ~626,000  EHC’s 3-year stroke and non-EHC IRFs; view our Life                  strokes  CAGR is ~6%.      After Stroke guide at:                                               https://ehc.news/LifeAfterStroke                                              Stroke cases account for ~1/3 of                                             EHC’s Medicare Advantage                                             volume.              Source: https://www.ahajournals.org/doi/pdf/10.1161/CIR.0000000000000659; page e305; Table 14-1 Encompass Health                                                       29
 Post-acute solutions   Our post-acute solutions will leverage our clinical expertise, large post-acute datasets,  EMR technologies, and strategic partnerships to drive improved patient outcomes and  lower cost of care across the entire post-acute episode.    2018                                     2019     Modified and implemented Cerner’s      Refine 90-day post-acute readmission      HealtheCare module; created a           prediction model; deploy to additional      longitudinal patient record to manage   EHC hospitals      patients across the post-acute      continuum                                – expanded pilot to seven hospitals in                                                 the Houston, Texas market in April      – piloting in Tyler, Texas                 2019                                             Design and implement post-acute care                                              clinical decision support tools     Deployed ReAct in all of our hospitals                                             Design and implement quality reporting                                             tool for building preferred provider      Developed 90-day post-acute             networks      readmission prediction model                                             Create a provider hub to automate      – piloting in Tyler, Texas and          market analysis tools for quality        Petersburg, Virginia                  reporting across episodes                                                                                         Use Medalogix for home health care      Began utilizing care navigators to follow plan optimization and to reduce      a patient throughout an episode of care emergency room visits and hospital                                              readmissions  Encompass Health                                                                30
 Inpatient rehabilitation: transition to CARE Tool payment system  Background Elimination of FIMTM functional assessment items from IRF-PPS  Effective October 1, 2019, CMS will replace the FIMTM functional assessment  measures with the CARE Tool measures for reporting and payment purposes.  This implementation makes substantial changes to the CMGs, relative weights and  average length of stay values for the IRF-PPS and will, therefore, impact Medicare  revenue per discharge.         Transition to CARE Tool payment system   Provide feedback to CMS on potential effects of care assessment measures on   CMGs, relative weights and average length of stay  Continue education of hospital staff on CARE Tool utilization, including   documentation requirements  Monitor FIMTM assessment to CARE Tool assessment comparative measures to ensure   consistent representation of patients’ functional status   Encompass Health                                                       31
 Home health: Patient-Driven Groupings Model (PDGM)   Background  Move to the Patient-Driven Groupings Model    • Effective Jan. 1, 2020, PDGM will:     - move from 60-day episodes for payment to 30-day payment periods;     - rely more heavily on clinical characteristics; and     - eliminate therapy service use thresholds in case-mix adjustments.    • To achieve budget neutrality, CMS assumed behavioral changes will offset a     6.4% reduction in the base rate.          Home health PDGM preparation strategies     Pursue legislative avenues to require CMS to use observed (vs. assumed) behavior      changes to achieve budget neutrality     Provide feedback to CMS on magnitude and timing of assumed behavioral changes     Ensure productivity levels are realized for full-time staff     Optimize acuity-scaled care planning     Maximize the economies generated by scale and density     Utilize technology to drive incremental efficiencies   Encompass Health                                                                32
 Home health: Review Choice Demonstration (RCD)*   State            Start date     Company        Overview                                  locations                                              Following the pause of the Pre-Claim Review  Illinois        June 1, 2019        3       Demonstration (“PCRD”) on April 1, 2017, CMS worked  Ohio          To be determined      1       to revise PCRD to offer more flexibility and choice for  North Carolina To be determined     6       providers. RCD will give providers in the demonstration  Florida       To be determined     17       states an initial choice of three options.  Texas         To be determined     52          Three options               Preparation                    1. 100% pre-claim review                                              2. 100% post-payment review •  Reviewed all documentation                3. Minimal post-payment review with a 25% payment    requirements                                 reduction for all Medicare home health services •  Implemented system features to make       If a provider chooses 100% pre-claim or post-payment                                              review (which applies to every episode of care) and    electronic submission easier              reaches a 90% affirmation rate, it may elect to have •  Continue to work with physicians to       only 5% of its claims spot checked to ensure continued    ensure consistency between their          compliance.    supporting documentation and our             Timeline    supporting documentation                  The demonstration will begin in June 2019 with home •  Add administrative resources as           health providers operating in Illinois. Implementation                                              will expand to Ohio, North Carolina, Florida and Texas    staggered implementation occurs           on dates yet to be announced by CMS. CMS has the •  Apply learnings from our Illinois         option to expand to other states in the Palmetto    locations that successfully navigated     jurisdiction.    PCRD with an affirmation rate in             Duration    excess of 90%                             Five years                                 * On May 29, 2018, CMS announced its intention to restart PCRD as RCD. Encompass Health                                                                              33                             Source: https://www.gpo.gov/fdsys/pkg/FR-2018-05-31/pdf/2018-11492.pdf
 Guidance - reiterated as of May 13, 2019               2018                                2019             Actuals                            Guidance     Net operating revenues              Net operating revenues            $4,277.3 million              $4,500 million to $4,600 million     Adjusted EBITDA(9)                  Adjusted EBITDA(9)              $901 million                  $925 million to $945 million     Adjusted earnings per share         Adjusted earnings per share    from continuing operations          from continuing operations    attributable to Encompass           attributable to Encompass    Health(10)                          Health(10)                $3.63                            $3.71 to $3.85  2019 guidance does not include the Company's pending acquisition of Alacare Home Health and Hospice which is expected to close in June 2019.  Encompass Health            Refer to pages 105-107 for end notes. 34
 2019 Guidance considerations         Inpatient rehabilitation                    Home health and hospice  u Estimated 1.2% increase in Medicare pricing u Estimated 1.5% net Medicare pricing   for Q1 through Q3; estimated 0% to (0.25)%    increase for CY 2019 (see page 40)   reimbursement rate change for Q4 (see page                                               u Salary increase of approx. 3.0%; benefits   40)                                                 increase of approx. 6.0% to 8.0% u   Salary increase of approx. 3.0%; benefits   u Inclusive of ~$50 million of home health and   increase of approx. 6.0% to 8.0%              hospice acquisitions in 2019, excluding the u Revenue reserve of 1.4% to 1.6% of net        Alacare transaction which is expected to                                                 close in June 2019   operating revenues                          u u                                               Administrative costs related to the Review   Administrative costs related to transition to Choice Demonstration program and   CARE Tool payment system                      preparation for PDGM                                      Consolidated u Investments of $3 million to $5 million in strategic initiatives, including post-acute solutions u Ongoing effects of Hurricane Michael on operations in the Panama City, Florida market u Diluted share count of ~100 million shares u Tax rate of ~27% u Adoption of new lease accounting standard resulted in a gross-up of assets and corresponding   liabilities of ~$350 million and will not have a material impact on our income statement or   statement of cash flows.   Encompass Health                                                                      35
 Adjusted free cash flow(11) assumptions                                              3 Months    3 Months                 Certain cash flow items       2019        2018         2019        2018                       (millions)             Actual       Actual   Assumptions     Actual             Cash interest payments (net of            amortization of debt discounts     $36.2       $34.6     $145 to $155   $143.3            and fees)             Cash payments for income taxes,                                               $2.9         $1.5     $110 to $130   $114.8            net of refunds              Working capital and other          $46.4      $(19.1)     $30 to $50   $(48.1)              Maintenance CAPEX                  $29.6       $36.1     $160 to $170   $152.9              Adjusted free cash flow           $127.8       $170.2    $420 to $500   $538.1   Encompass Health           Reconciliations to GAAP provided on pages 95-102; Refer to pages 105-107 for end notes. 36
 Uses of free cash flow                                                        3 Months                                                         2019          2019         2018                                                        Actuals    Assumptions     Actuals                    IRF bed expansions                   $8.2       $40 to $50      $22.3                    New IRFs                      - De novos                         23.7        85 to 115       76.4                      - Acquisitions                       —       opportunistic      —                      - Replacement IRFs and other       13.4        90 to 110       24.5         Growth in            core    Home health and hospice acquisitions          business    - Alacare Home Health and Hospice    —           217.5          —                      - Camellia Healthcare                —            —           131.4                      - All other                        13.7          ~50           12.5                                                                   $482 to $543,                                                                   excluding IRF                          Quarterly cash dividend currently $59.0   acquisitions    $267.1                          set at $0.27 per common share(12)           Debt         reduction  Debt (borrowings) redemptions, net  $(44.7)   $ opportunistic   $63.3                    Cash dividends on common stock(12)   28.3         ~$108         100.8        Shareholder Purchase of Home Health Holdings        distributions rollover shares and exercise of SARs                    (see page 65)                        13.4          TBD           69.4                    Common stock repurchases             11.0      opportunistic      —                                                         $8.0          $TBD         $233.5                         ~$237 million authorization as of                               March 31, 2019(13)   Encompass Health                 See the debt schedule on page 63. Refer to pages 105-107 for end notes. 37
 Rebranding and name change  The Company’s rebranding and name change reinforce its existing strategy and  position as an integrated provider of inpatient and home-based care.  JULY 2017          APRIL 2018               OCT. 2018 Announced          Phase 1 field asset      Phase 3 field asset planned            conversions              conversions name change     JAN. 2018            JULY 2018              JAN. 2019        As of Jan. 1, 2019, all of the   Legally changed      Phase 2 field asset    Phase 4 field asset Company’s hospitals and   name and             conversions            conversions;       home health and hospice   stock ticker to                             transition complete  locations have been   Encompass Health   Corporation (EHC)                                                 transitioned to the                                                                  Encompass Health brand.                                     2017        2018         2019        Total          Operating expenses*     ~$6 million ~$11 million ~$1 million ~$18 million          Capital expenditures    ~$1 million ~$3 million  ~$3 million ~$7 million          Total rebranding investment ~$7 million ~$14 million ~$4 million ~$25 million   Encompass Health           *Included in corporate general and administrative expenses line item 38
 Business outlook: 2019 to 2021                 2019             2020             2021                   • Implement changes to reimbursement models in both business segments Key              • Enhance clinical collaboration between the Company’s IRFs and home health locations operational      • Build stroke market share (https://ehc.news/LifeAfterStroke) initiatives                  • Develop and implement post-acute solutions                  • Participate in alternative payment models                  • Same-store IRF growth Core             • New-store IRF growth (de novos and acquisitions) growth                  • Same-store home health and hospice growth                  • New-store home health and hospice growth (acquisitions and de novos) Expansion of service                          Consider acquisitions of other complementary businesses offerings  Strong balance sheet    • Maintain real estate ownership strategy and balance sheet flexibility                   • Quarterly cash dividends on common stock Shareholder distributions    • Opportunistic common stock repurchases                  • Purchases of Home Health Holdings rollover shares and exercises of SARs   Encompass Health                                                                              39
 Business outlook 2019 to 2021: revenue assumptions              Volume                          Inpatient Rehabilitation*                            Home Health*     (includes new stores)                 3+% annual discharge growth                  10+% annual admission growth                                           Approx. 74% of segment revenue                Approx. 85% of segment revenue        Medicare Pricing                                        FY 2019        FY 2020         FY 2021        CY 2019                         CY 2021                                                               (14)                                   CY 2020     Amounts are approximations       Q418-Q319      Q419-Q320       Q420-Q321       Q119-Q419                (15)  Q121-Q421                                       Final Rule   Proposed Rule     Estimate†       Final Rule   Q120-Q420         Estimate†       Market basket update              2.9%            3.0%           3.3%            3.0%            1.5%           3.2%     Healthcare reform reduction        (0.75%)            -              -               -              -               -      Legislative changes to the        rural add-on program(15)            -               -              -            (0.1%)          (0.2%)          (0.1%)          Change in outlier         fixed-dollar loss ratio            -               -              -             0.1%             -               -         Healthcare reform        productivity adjustment          (0.8%)          (0.5%)          (0.6%)         (0.8%)            -             (0.6%)     Net market basket update            1.35%           2.5%           2.7%            2.2%            1.3%           2.5%    Change in wage index and other       (0.1%)          (0.1%)            -               -              -               -          labor adjustments Change in CMG relative weights and                    (2.4%) to   average length of stay values(14)    (0.1%)          (2.65%)           -               -              -               -     Change in outlier threshold        (0.0%)          (0.0%)            -               -              -               -            Impact from         case mix re-weighting              -               -              -            (0.7%)            -               -          Estimated impact        to Encompass Health(16)           1.2%       0% to (0.25)%                       1.5%          (3.8%)**        Medicare Advantage                     Approx. 19% of revenue                         Approx. 13% of revenue    and managed care pricing        Expected increases               2-4%            1-3%           2-4%            0-2%           0-2%            0-2%     * Outpatient and hospice, which services accounted for 5.0% of total operating revenues for full-year 2018, are not included in the pricing assumptions. ** Estimated PDGM impact of (5.1%) plus 1.3% net market basket update; excludes potential CMS behavioral change reduction. See end note 15 for further details.                                      † Estimates are based on current CMS and Congressional Budget Office projections  Encompass Health                  which do not include potential changes from legislation or the CMS rule-making process.    40                                                      Refer to pages 105-107 for end notes.
 Business outlook 2019 to 2021: labor and other expense assumptions                  Inpatient rehabilitation                                Home health and hospice                          Salaries and benefits      2019          2020          2021                         Salary increases         2.75-3.25%    2.75-3.25%   2.85-3.35%                         Benefit costs increases     6-8%         5-10%         5-10%                                               % of salaries and benefits                            Salaries                                                  Salaries                                             Salaries          ~90%                          and benefits                                             and benefits                             ~70%           Benefits          ~10%                     ~85%                        IRF                                                    Other                    expenses                                                 expenses                      ~30%                                                     ~15%                      IRF expenses                                Home health and hospice expenses         •Other operating expenses and supply                      •Other operating expenses and supply           costs tracking with inflation                            costs tracking with inflation   Encompass Health                                                                                                41
 IRF-PPS fiscal year 2020 proposed rule: key provisions                         Update to payment rates   The proposed rule would:                                                         Company observations   • Implement a net 2.5% market basket increase         – 3.0% market basket increase         – (50 bps) healthcare reform productivity reduction;                    Pricing:    • Update case mix group relative weights and average length of stay values;   •  Net pricing impact to the   • Increase the outlier fixed loss threshold; and                                 Company expected to be 0% to   • Revise the wage index and labor-related share values.                          down 0.25% for FY 2020 (see            Quality reporting and IRF coverage requirements                         page 40) •  CMS proposes to adopt 2 new quality measures to begin collection Oct. 1,    2021: 1) Transfer of Health Information - Provider; and 2) Transfer of Health • Because of its efficient cost    Information - Patient                                                           structure, the Company receives •  CMS proposes that IRF quality data be reported to CMS for all patients,         very few outlier payments    regardless of payor starting FY 2022.                                           despite treating higher acuity •  CMS proposes to adopt multiple new patient assessment items on the IRF-PAI    under the IMPACT Act framework of Standardized Patient Assessment Data          patients (see page 10).     Elements starting FY 2022. The proposed items cover the following areas:         ◦  Cognitive function items                                             FY 2020 changes(14):         ◦  Special services, treatments and interventions items                  • The Company will continue         ◦  Medical condition and comorbidity items                                 providing input to CMS on the         ◦  Impairment items         ◦  Social determinants of health items                                     development of the case-mix                                                                                    methodology changes.    Elimination of FIMTM functional assessment items from IRF-PPS(14)   • Beginning Oct. 1, 2019, CMS will remove the FIMTM functional assessment     items from the IRF-PAI.   • CMS will replace the FIMTM measures with data items located in the Quality     Indicators section of the IRF-PAI for payment purposes.   • This change required CMS to make substantial changes to the CMGs, relative     weights and average length of stay values for the IRF-PPS.                             Source: https://www.federalregister.gov/documents/2019/04/24/2019-07885/medicare-program-inpatient-     Encompass Health                      rehabilitation-facility-prospective-payment-system-for-federal-fiscal     42                                                     Refer to pages 105-107 for end notes.
 HH-PPS calendar year 2019 final rule: key provisions             Final rule update to 2019 payment rates                                                                        Company observations The final rule will: •  Implement a net 2.2% market basket increase (3.0% market basket    less a 0.8% healthcare reform productivity reduction);           Pricing:  •  Implement the rural add-on modifications as required by the      •  Net pricing impact to the    Bipartisan Budget Act (BBA) of 2018; and                            Company expected to be an •  Reduce the Outlier FDL ratio from 0.55 to 0.51.                     increase of ~1.5% for CY 2019                                                                        (see page 40)                New quality reporting measures  •  CMS will remove seven quality reporting measures from the CY 2021    HH Quality Reporting Program.                                     Quality: •  CMS will refine the HH Value-Based Purchasing program by removing • The Company will modify existing    two OASIS-based measures, replacing three OASIS-based measures                                                                        processes and systems to meet the    with two composite measures, and amending how the Total    Performance Scores are calculated.                                  changed requirements.     Patient-driven groupings model (PDGM) for CY 2020(15)                                                                                       (15) •  The final rule further refines the HH case-mix methodology for    Payment System     :    CY 2020 as required by Section 51001 of the BBA of 2018.          • The Company will continue to •  PDGM will use 30-day payment periods                                engage with CMS, Congress, and      –  Relies more heavily on clinical characteristics and            other stakeholders to ensure any      –  Eliminates therapy service use thresholds currently used in    change to the underlying payment         case-mix adjustments                                           system maintains patient access to •  To achieve budget neutrality, CMS assumed behavioral changes will   needed home health services.    offset a 6.4% reduction in the base rate.                          Source: https://www.federalregister.gov/documents/2018/11/13/2018-24145/medicare-and-medicaid-  Encompass Health              programs-cy-2019-home-health-prospective-payment-system-rate-update-and-cy 43                                              Refer to pages 105-107 for end notes.
 IMPACT Act of 2014 - enacted Oct. 6, 2014  Company observations and considerations with respect to the IMPACT Act:   ▪ It was developed on a bi-partisan basis by the House Ways and Means and Senate Finance Committees and   incorporated feedback from healthcare providers and provider organizations that responded to the   Committees’ solicitation of post-acute payment reform ideas and proposals.   ▪ It directs the United States Department of Health and Human Services (“HHS”), in consultation with   healthcare stakeholders, to implement standardized data collection processes for post-acute quality and   resource use measures.    ▪ Although the IMPACT Act does not specifically call for the implementation of a new post-acute payment   system, the Company believes this act will lay the foundation for possible future post-acute payment   policies that would be based on patients’ medical conditions and other clinical factors rather than the   setting where the care is provided.   ▪ It will create additional data reporting requirements for the Company’s IRFs(17) and home health agencies.   The precise details of these new reporting requirements, including timing and content, will be developed   and implemented by the Centers for Medicare and Medicaid Services through the regulatory process the   Company expects will take place over the next several years.  ▪ While the Company cannot quantify the potential financial effect of the IMPACT Act on Encompass Health,   the Company believes any post-acute payment system that is data driven and focuses on the needs and   underlying medical conditions of post-acute patients will be positive for providers who offer high-quality,   cost-effective care. Encompass Health believes it is doing just that and expects this act will be positive for   the Company.   ▪ However, it will likely take years for the quality data to be gathered, standardized patient assessment data   to be assembled and disseminated, and potential payment policies to be developed, tested and   promulgated. As the nation’s largest owner and operator of inpatient rehabilitation hospitals, the Company   looks forward to working with HHS, the Medicare Payment Advisory Commission and other healthcare   stakeholders on these initiatives.                                   Source: https://www.govtrack.us/congress/bills/113/hr4994/text  Encompass Health                       Refer to pages 105-107 for end notes.                  44
 Growth   Encompass Health is a leader in serving the post-acute patient population and has multiple avenues available for sustained growth in both segments.       Favorable demographic trends are driving increased demand.    Encompass Health                                               45
 The Company has multiple avenues available     for sustained growth in both segments    u  The Company continues to have excellent organic growth opportunities in      inpatient rehabilitation, home health, and hospice.      —  Track record of consistent market share gains      —  IRF organic growth supplemented by bed additions      —  Maturation of acquired home health locations   u  Target four to six new inpatient rehabilitation hospitals per year to complement      organic growth      —  De novos and acquisitions will allow entry into, and growth in, new markets.      —  Proven track record of success   u  Target $50 to $100* million per year toward home health and hospice acquisitions      to complement organic growth      —  Home health acquisitions and new-store growth prioritized in Encompass Health         IRF markets without current overlap      —  Build additional scale in hospice via acquisitions and de novos                *In March 2019, the Company signed a definitive agreement to acquire Alacare Home Health and               Hospice. As a result, the Company expects to spend approximately $50 million on other home               health and hospice acquisitions in 2019.  Encompass Health                                                                46
 Both segments benefit from a demographic tailwind:      growth in the Medicare beneficiary population           Projected population of age 65+                         Baby Boomer wave                    • The growth rate of Medicare                       reaches average age of                 beneficiaries increased in 2011 to an Millions                        an Encompass Health                   approx. 3% CAGR as “Baby Boomers”                       Medicare patient (~76).                started turning age 65.                                                                 ◦ ~10,000 Baby Boomers turn 65                                                                   each day        ~3% CAGR                                            • The CAGR for the population in                                                              Encompass Health’s average patient                                                              age range is ~5%.                                                                 CAGR (population growth by age)                                        46%       46%                              45%                (33.3M)                                       (30.7M)                 Age    2014   2018   2022   2026                    43%      (26.8M)                                 to 2018 to 2022 to 2026 to 2030          41%      (22.7M)         (19.0M)                                              65-69   2.8%   2.6%   1.6%   (0.1)%                                                              70-74   4.9%   3.7%   2.5%   2.1%                                                              75-79   4.0%   5.0%   4.9%   2.0%                                                               80+    1.5%   2.4%   3.6%   5.2%                                                              Total   3.2%   3.3%   2.9%   2.2%                 Age 65-69      Age 70-79     Age 80+   Encompass Health           Source: www.census.gov/data/datasets/2017/demo/popproj/2017-popproj.html 47
 Multi-faceted inpatient rehabilitation growth strategy                                     New beds                                                              Total IRFs              2018 Bed count                                                                                                                                 increase                                1,600                                                                              140                                                                                                                   135       •  Shelby County, AL (34 beds)                                1,400                                                                                                                   130                                                                                                                             •          De novos              1,200                                                                              125          Bluffton, SC (38 beds)                                                                                                                   120                                1,000                                                                                        •  Murrells Inlet, SC (29 beds)                                                                                                                   115                                  800                                                                              110        Acquisitions                                                                                                         •  Winston-Salem, NC (68 beds)                                                                                                                   105                                  600                                                                                                                   100       •  Bed expansions (26 beds)                                  400                                                                              95              Bed                                                                                                  90            2019 Projected bed                                  200        expansions                                                                                                 85            count increase    Wholly  owned and joint ventures  0                                                                             80        •  Lubbock, TX (40 beds)                                             2014        2015        2016        2017        2018      Projected                                                                                                         2019                •  Boise, ID (40 beds) % Increase in licensed beds                   4%         18%          1%          4%          1%          3%                                                                                                                             •  Katy, TX (40 beds) Total number of licensed beds               7,095       8,404      8,504*       8,851       8,966†      9,261‡ Total number of IRFs                         107         121         123*        127         130†         134               •  Murrieta, CA (50 beds)             * 2016 total number of licensed beds and total number of IRFs include the disposal of 61 beds at               Beaumont, TX (sold June 2016) and 83 beds at Austin, TX (closed August 2016).                                  •  Bed expansions (~150 beds)            † 2018 total number of licensed beds and total number of IRFs include the consolidation of the Ft. Worth              market (decrease of 60 beds) and the delicensure of 20 SNF beds at a Dallas IRF.            ‡ Projected 2019 total number of licensed beds includes the delicensure of 25 SNF beds at Round Rock, TX.     Encompass Health                                                                                                                                                48
 Inpatient rehabilitation growth pipeline        Disciplined approach to new store growth                                                                               The Company’s value proposition         –   $7.9 billion Medicare IRF market   –                                                                           CAPEX to build free-standing IRF, freeing up space for  Considerations:                                                   ü     medical/surgical beds in an acute care facility for a JV                                                                          partner      –  Market demographics                                              Enhance the position of the acute care hospital to meet                                                                    ü     quality requirements and effectively participate in alternative                                                                          payment models      –  Presence of other IRFs                                           Increased acute care hospital flow-through by taking                                                                    ü     appropriate higher acuity patients faster than other post-      –  Geographic proximity to other Company                            acute settings                                                                    ü     Clinical collaboration between the Company’s IRFs and home         IRFs and home health locations                                   health locations                                                                          Proprietary rehabilitation-specific clinical information system      –  Potential joint venture partners                           ü     (ACE-IT) integrated with acute care hospitals’ clinical                                                                          information systems to facilitate patient transfers, reduce                                                                          readmissions, and enhance outcomes            Typical development pipeline                                  Proprietary real-time performance management systems (care                                                                    ü     management, labor productivity, quality reporting, therapy                   Exploratory /     Actively    Near-term                analysis and expense management) to ensure appropriate                                                                          clinical oversight and improve profitability                   CA executed       working     actionable                                                                    ü     Proven track record of efficient management of regulatory                                                                          process (CON, licensure, occupancy, etc.)  No. of projects     30 - 40        10 - 12        4 - 6                                                                    ü     Experienced transaction/integration team Factors:                                                                    ü     National leader in post-acute policy activities    •   Certificate of need process/timeline    •   Fair market valuation of contributed assets (joint          ü     TeamWorks approach to sales and marketing        ventures only)                                                                    ü     Supply chain efficiencies    •   Partnership complexities                                                                    ü     Medical leadership and clinical advisory boards                                            Source: MedPAC, Medicare Payment Policy, March 2019 - page 251   Encompass Health                                     CA = confidentiality agreement                                          49
 Inpatient rehabilitation acute care joint venture partnerships  • The Company’s IRF joint ventures began in 1991 with Vanderbilt University Medical Center.  • The Company’s joint venture acute care hospital partners own equity that ranges from 2.5% to 50%.  • 44 of 45 IRFs are consolidated joint ventures, with one accounted for under the equity method.        45* IRF joint venture hospitals in place with major healthcare systems such as:  •  Barnes-Jewish •  University of Virginia Medical Center •  Vanderbilt University Medical Center •  Geisinger Health System •  Martin Health System •  Monmouth Medical Center     (Barnabas Health) •  Yuma Regional Medical Center •  Mercy Health System •  Maine Medical Center •  Methodist Healthcare-Memphis Hospitals,    a subsidiary of Methodist Le Bonheur Healthcare      Joint ventures with acute care hospitals establish a solid foundation for integrated delivery      and alternative payment models.                       * Excludes IRF joint venture hospitals that have been announced but were not operational as of March 31, 2019: Encompass Health   Lubbock, TX; Boise, ID; and Dayton, OH (current wholly owned 50-bed IRF that will become a joint venture with 50                    Premier Health upon completion of a new 60-bed hospital).
 De novo IRFs and acquisitions                                                             Operations  Joint      # of new beds                                            Location           date     Investment considerations                                        venture? 2017  2018 2019  2020                                        De novo IRFs: •  IRR objective of 13% (after tax)  •  Joint venture capitalization            Westerville, OH  Q2 2017     Yes    60 •  Certificate of need (“CON”) costs,      Jackson, TN*     Q3 2017     Yes    48    where applicable                        Pearland, TX     Q4 2017            40 •  Clinical information system (“CIS”)     Shelby County, AL Q2 2018                 34    installation costs                      Bluffton, SC     Q2 2018                  38 •  Medicare certification for new hospitals Winston-Salem, NC Q4 2018   Yes          68    (minimum of 30 patients treated for                                         1  Lubbock, TX      Q2 2019     Yes               40    zero revenue)                                         2  Boise, ID        Q3 2019     Yes               40                                         3  Katy, TX         Q4 2019                       40                                         4  Murrieta, CA     Q4 2019                       50    6   Previously announced IRF        development projects underway    5  Sioux Falls, SD    2020                              40                                         6  Coralville, IA     2020                              40    5   New states                      Acquisitions:          –  Mississippi in 2017          –  North Carolina in 2018         Gulfport, MS     Q2 2017     Yes    33          –  Idaho in 2019                  Murrells Inlet, SC Q3 2018   Yes          29          –  South Dakota and Iowa in   Bed expansions, net**                   166   26  ~150  ~100             2020                                                                                347  195  ~320  ~180    Encompass Health     * Existing wholly owned, 40-bed IRF in Martin, TN became a joint venture in conjunction with this opening 51                   ** Net bed expansions in each year may change due to the timing of certain regulatory approvals and/or construction delays.
 De novo costs and timeline   •  Prototype includes all private rooms               Capital cost (millions)                   Low        High •  Core infrastructure of building anticipates          Construction, design, permitting, etc.  $17         $21    future expansion (accretive to financial             Land                                       2          5    returns)                                             Equipment (including CIS)                  3          4 •  Factors that impact costs/timeline:                    Range of a typical 40-50 bed IRF      $22         $30       ◦  CON status                                                       Pre-opening expenses* (millions)          Low         High       ◦  State regulatory requirements                                                         Operating                               $0.5        $1.0       ◦  Local planning and zoning approvals                                                         Salaries, wages, benefits                 0.4        1.0       ◦  Hospital-specific complexities                                                                                                 $0.9        $2.0     Illustrative timeline                              Project start                  Groundbreaking                                  Opening             CON process          (if applicable)            Zoning & design     Permitting                   Construction        6 months to 3 years                                          18 to 20 months                      *Pre-opening expenses include expenses for training new employees on the clinical information system, which vary based on the  Encompass Health                                                                                                52                                                     timing of the first admission.
 IRF de novo occupancy and EBITDA*  trends   Occupancy                                                Sustained positive EBITDA  100%    90%    80%    70%    60%    50%    40%    30%    20%    10%     0%              1           2          3          4          5          6          7          8          9          10         11         12                                                                         Months                 Middletown (12/2014)            Franklin (12/2015)               Modesto (10/2016)               Westerville (04/2017)                 Pearland (10/2017)              Shelby County (04/2018)          Bluffton (06/2018)              Murrells Inlet (09/2018)                 The Company’s  average 2018 occupancy  Encompass Health                          * IRF EBITDA = earnings before interest, taxes, depreciation, and amortization                     53                                             directly attributable to the related hospital.
 Multi-faceted home health and hospice growth strategy                      • Strong demand due to cost effectiveness of home-based care and                        implementation of alternative payment models  Organic growth      • Strong organic growth from existing locations                      • Located in markets with attractive demographics                        *  Currently located in states that represent ~70% of total Medicare home                           health and hospice spend                      • Highly fragmented market  Home health         • Prioritization of new IRF overlap markets  acquisitions        • Proven ability to consummate and integrate acquisitions  and de novos        • Sustainable and replicable culture                      • Implementation of best practices and technology                       • Attractive partner due to quality of outcomes, data management, scale                        and market density, and willingness/ability to treat high acuity and/or  Clinical              chronic patients  collaboration       • Plan of care coordination with the Company’s IRFs                      • Care Transition Coordinators serve as representatives in transitional care                        activities and strategic relationships with other healthcare providers   Hospice             • Prioritization of existing home health markets  acquisitions        • Opportunity to build scale and leverage components of existing  and de novos          infrastructure  Encompass Health                                                                      54
 Home health growth pipeline                                                                              Number of home health agencies over time •   $17.7 billion Medicare home     health market is highly                                    13,000            The number of home health agencies      fragmented with over 11,800                                                   is near an all-time high and presents     home health agencies.                                      12,000           significant consolidation opportunities.  •   Approx. 93% of these have                                  11,000     annual revenue of less than     $5 million.                                                10,000                                                              s                                                              e                                                              i  •   Top 4 public companies                                   c  9,000                                                              n                                                              e      represent approx. 20% of the                             g                                                              A                                                              f      Medicare market.                                         o  8,000                                                              #  •   The Company represents                                      7,000     3.5% of the Medicare home     health market.                                              6,000        Prioritize acquisitions in                                5,000        Company IRF markets to                                    4,000  enhance clinical collaboration                                                                          1997     1999    2001     2003    2005     2007    2009    2011     2013    2015     2017                                                                                     Interim                                                                           Cost-    payment                                                                           based                                Prospective Payment System (PPS)                                                                                     systems                                                                                      (IPS)                                    Source: MedPAC, Medicare Payment Policy - March 2019, page 234; March 2018, page 246; March 2017, page 231;  Encompass Health                 March 2016, page 214; March 2015, page 218; March 2014, page 221; March 2013, page 194; and March 2003, page                   55                                   112; MedPAC - Healthcare spending and the Medicare program, June 2006, page 131; Medicare Claims Data
 Hospice growth pipeline  • Medicare hospice market is approx. $18 billion. • 1.5 million Medicare beneficiaries received       Acquisition strategy for hospice  hospice services from approx. 4,500 providers in   • Build additional scale  2017.                                              • Medicare focus • Hospice use among Medicare beneficiaries has      • Home-based service offering  grown substantially in recent years, suggesting    • Strong clinical practice and clean  greater awareness of and access to hospice           compliance record  services.                                                     • Highly regarded market reputation  –  In 2017, only 50% of Medicare decedents utilized     hospice services, and of those, more than 25%   • Attractive geography and demographics     died in the first seven days of care, even though • Ability to leverage existing infrastructure     hospice care is intended for patients that     physicians believe have 6 months or less to live.  –  On January 1, 2016, Medicare began paying for     voluntary advance care planning conversations % of Medicare decedents who used hospice     between a beneficiary and his or her physician. • Annual Medicare spending on FFS decedents  averages ~$34,500 per beneficiary — almost 4x  higher than the average cost for beneficiaries        2000                  2017  who did not die during the year.                      ~23%                  ~50%  –  Roughly 25% of traditional Medicare spending      for health care is for services provided to     beneficiaries age 65 and older in their last year     of life.                           Source: MedPAC, Medicare Payment Policy, March 2019, pages 311, 321, and 316;  Encompass Health       https://www.kff.org/medicare/fact-sheet/10-faqs-medicares-role-in-end-of-life-care/ 56
 Alternative payment models  Most models remain in the early or pilot stage and results have been mixed. Both of our segments continue to participate in various alternative payment                          model initiatives.    Encompass Health                                               57
 Accountable Care Organizations (“ACOs”)                                               Medicare Shared Savings Program (MSSP)                                             (2018 - 561 ACOs / 10.5 million Medicare beneficiaries)        As of         •  Performance Year 5 (2017) results:   January 2018,            ◦  284 of 472 ACOs (60%) held spending below their benchmark.                                  ▪  125 of these ACOs reduced health costs compared to their benchmark, but did not meet     there were                       the minimum savings threshold for shared savings.        619                 ◦  188 ACOs (40%) did not reduce costs compared to their benchmark.                            ◦  Shared Savings Program ACOs generated total program savings of $1.1 billion or $314 million after     MSSP and                  adjusting for shared savings/loss payments.  next generation     •  On December 21, 2018, CMS issued a Final Rule for the Shared Savings Program called “Pathways to Success.”   ACOs serving          The new program contains two participation tracks that will start on July 1, 2019.                            ◦  New BASIC track allows eligible ACOs to begin under a one-sided risk model and incrementally phases- ~11.9 million                 in higher levels of risk that at the highest level will qualify as an Advanced “Alternative Payment     Medicare                  Model” under the Quality Payment Program.                            ◦  New ENHANCED track, based on the Shared Savings Program’s existing Track 3, is intended to allow   beneficiaries.              ACOs to take on higher levels of risk and possible shared-savings.                            ◦  Current Track 1, Track 2, and Track 1+ Models will be discontinued.                                                          Next generation ACOs   Performance                                           (2018 - 58* ACOs / ~1.4 million Medicare beneficiaries)   results so far     •  Initiative launched in January 2016 for ACOs that are experienced in coordinating care for populations      have been           of patients                      •  Allows providers to assume higher levels of financial risk and reward than are available under the MSSP      mixed.          •  Performance Year 2 (2017) results:                            ◦  32 out of 44 ACOs generated savings and received shared savings of $230 million.                            ◦  Remaining 12 ACOs generated losses and were required to pay back $57 million to CMS.                                     The Company serves as the exclusive preferred home health provider for two Premier ACOs.                                            (~24,000 total covered lives in northern Texas and southern Oklahoma)                                    EHC receives increased referrals for Medicare home health patients from the ACOs                                    Eligible to receive a portion of the ACOs’ shared savings                                    Total shared savings achieved by both ACOs in 2017 was $6.0 million.                                     - Met the minimum savings rate in one of the ACOs to participate in shared savings                              Source: CMS/HHS press releases and public use files; MedPAC, Report to Congress, June 2018 - page 218   Encompass Health                   * Seven of the original 58 participating organizations have dropped out of the 58                                     Next Generation ACO model since participants were announced in January 2018.
 Home Health Value-Based Purchasing Model   Over the long term, the Company believes it is well-positioned to benefit from a delivery       system that rewards providers who are committed to providing high-quality care.     In the calendar year 2016 HH-PPS final rule,             Total Performance Scores (a numeric score ranging    CMS finalized a Home Health Value-Based                 from 0 to 100 based on each agency’s performance)    Purchasing (“HHVBP”) Model that covers five            will be calculated from the following set of measures*    performance years beginning Jan. 1, 2016 and                         for performance year 2019:    concluding on Dec. 31, 2022.                          •  Two composite measures from existing Outcome and         Medicare-certified home health agencies             Assessment Information Set (“OASIS”) data collection           that provide services in the following            and three process measures submitted through the          states will be required to participate in          HHVBP portal                       the model:                         •  Four outcome measures from existing OASIS data             1. Arizona                 5                    collection and two outcome measures from claims data             2. Florida                 17                •  Five HHCAHPS** consumer satisfaction measures             3. Iowa                    —             4. Maryland                3                                                           Performance years   Calendar year for   Maximum payment             5. Massachusetts           5                                     payment adjustment    adjustment (-/+)             6. Nebraska                —                        2016  1st Adjustment  2018†              3%             7. North Carolina          6                        2017                2019‡                5%             8. Tennessee               9                        2018                2020                 6%             9. Washington              —                        2019                2021                 7%            Company Locations           45                       2020                2022                 8%                                                           † Majority of EHC locations in the nine VBP states were acquired in late 2015 or   ~22% of the Company’s home health Medicare revenue      2016; impact of ($0.3) million, or a (0.27%) payment adjustment to Medicare                                                           revenue in the nine VBP states, to EHC in 2018.                                                           ‡ EHC expects a neutral to slightly positive payment adjustment to Medicare                                                           revenue in the nine VBP states in 2019.                              Source:  https://innovation.cms.gov/initiatives/home-health-value-based-purchasing-model Encompass Health    * Per the CY 2019 HH Final Rule at: https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-24145.pdf 59                                  ** Home Health Care Consumer Assessment of Healthcare Providers and Systems
 Capital structure                 Encompass Health is positioned with a                cost-efficient, flexible capital structure.   Encompass Health                                               60
 Debt maturity profile - face value     As of March 31, 2019*                                                                                                            Callable beginning                                                                                                           September 2020    ($ in millions)                                                Callable beginning                                                                    November 2017                          $636                        Available                                                                                               $1,200                                                                 Callable beginning            Senior                                                                    March 2018                 Notes                                                                                               5.75%                  $25 Drawn +             Revolver                  $39 reserved            capacity                     for LC’s                                                              $276           $300 Senior                       $350 Senior                                                          Term Loans       Notes 5.125%                       Notes 5.75%                                          Revolver          2018             2021              2022             2022             2023             2024              2025                               No significant debt                            maturities prior to 2022                            * This chart does not include ~$400 million of finance lease obligations or ~$21 million of other notes payable. Encompass Health                                                                                                             61                                                       See the debt schedule on page 63.
 Financial leverage and liquidity                                Total debt                                                              Liquidity                          Leverage ratio*        (Billions)                                                                                           March 31,             Dec. 31,            4.6x**                                                                                              2019                  2018                                                                              Cash available              $            56.1    $            69.2                                                                              Revolver                    $           700.0    $          700.0                                                                               Less:                                                                                - Draws                               (25.0)               (30.0)           3.17                                            2.8x                 - Letters of credit                   (39.1)               (37.4)                       3.02                                                                              Available                   $           635.9    $          632.6                                   2.58        2.51        2.56               Total liquidity             $           692.0    $          701.8                                                                                                     Credit ratings                                                                                                                S&P               Moody’s                                                                              Corporate rating                BB-                  Ba3                                                                                 Outlook                    Stable               Stable                                                                              Revolver rating                 BB+                 Baa3                                                                              Senior notes rating              B+                  B1           2015        2016        2017        2018     Trailing                                                        4 Quarters     * The leverage ratio is based on trailing four quarters of Adjusted EBITDA.   ** Increase in financial leverage at the end of 2015 due to the acquisition of      Encompass Home Health and Hospice, Reliant Hospital Partners, and      CareSouth Health System, Inc.    Encompass Health                       Reconciliations to GAAP provided on pages 95-102; see also the debt schedule on page 63.              62   (1)
 Debt schedule                                                                                                      Change in                                                                  March 31,       December 31,         Debt vs.   ($millions)                                                      2019              2018            YE 2018   Advances under $700 million revolving credit facility,      September 2022 - LIBOR +150bps                          $          25.0  $           30.0  $            (5.0)   Term loan facility, September 2022 - LIBOR +150bps                    276.4             280.1               (3.7)   Bonds Payable:     5.125% Senior Notes due 2023                                        296.8             296.6               0.2     5.75% Senior Notes due 2024                                       1,194.8           1,194.7               0.1     5.75% Senior Notes due 2025                                         345.2             345.0               0.2   Other notes payable                                                    20.8             104.2              (83.4)   Finance lease obligations                                             400.1             263.8             136.3     Long-term debt                                            $       2,559.1  $       2,514.4   $           44.7   Debt to Adjusted EBITDA                                                2.8x              2.8x   Encompass Health                        Reconciliations to GAAP provided on pages 95-102                        63
 IRF real estate portfolio   130 inpatient rehabilitation hospitals: 8,941 licensed beds   4,694 licensed beds                                                                            Own ~70% of IRF real estate              in CON states                                                                                                                       As of March 31, 2019                                                                                                                  61 own building and land                                                                                                                  29 own building only                                                                                                                 40 lease building and land                                                                                                          4,247 licensed beds                                                                                                         in non-CON states      1 of the 130 IRFs is nonconsolidated. For that IRF, the                                                                    A CON is a regulatory requirement in some states and federal    Company owns the building only. The Company’s licensed bed                                                                 jurisdictions that require state authorization prior to proposed    count does not include the 51 beds associated with the                                                                     acquisitions, expansions, or construction of new hospitals.     nonconsolidated IRF.  Encompass Health                                                                                                                                                                           64
 Overview of rollover shares and SARs held by members of  the home health and hospice management team                                                       Background     In connection with the 2014 acquisition of Encompass Home Health and Hospice:   •  Certain members of that management team rolled a portion of their pre-acquisition equity into      the post-acquisition entity (“Home Health Holdings”) resulting in a 16.7% ownership interest (the      “Rollover Shares”).   •  The Company also granted stock appreciation rights (“SARs”) based on the fair value of the      common stock of Home Health Holdings to certain members of that management team. Half of        Home Health      the SARs vested on Jan. 1, 2019, and the other half vest on Jan. 1, 2020. Once vested, they are     Holdings      exercisable until they expire on Dec. 31, 2024 or in connection with termination of employment.   •  Home Health Holdings was capitalized with a promissory note to the parent company totaling ~                     Original       $385 million (equal to 5.5x the segment’s 2014 EBITDA). This was done to provide the opportunity                Rollover       for leveraged returns on the equity, thereby mimicking a private equity transaction structure.                   Shares   •  To the extent Home Health Holdings needs cash (e.g., acquisitions, capex, etc.), such amounts                    16.7%      are added to the principal amount of the note(s). Cash generated from the operations of Home      Health Holdings may be used to pay interest and principal on the note(s).                        Holder – The right (but not the obligation) to sell for cash up to 1/3 of the Rollover Shares to the parent after 1/1/18;                        2/3 after 1/1/19; and all outstanding Rollover Shares after 1/1/20 Options               Company – The right (but not the obligation) to purchase for cash all or any portion of the Rollover Shares after 1/1/20                        upon 20 days prior written notice                       Fair value of the Rollover Shares and SARs is determined using the product of Home Health Holdings’ EBITDA for the                       trailing 12-month period and a median market price multiple based on a basket of public home health companies and Valuation             recent transactions, less the current balance of the intracompany note(s) to the parent.                       As of March 31, 2019, the value of the Rollover Shares was ~$245 million and the value of the SARs was ~$86 million.                       In February 2018, each management investor exercised their rights to sell 1/3 of their Rollover Shares to EHC,                       representing ~5.6% of the outstanding common shares of Home Health Holdings. EHC settled the acquisition of those Activity              shares upon payment of ~$65 million, which decreased the ownership interest of the Rollover Shares to ~11.1%.                       In the first quarter of 2019, certain members of the management team exercised a portion of their vested SARs for cash                       proceeds of ~$13 million.   Encompass Health                                                                                                             65
 Information technology           Encompass Health utilizes information technology to         improve patient care and generate operating efficiencies.   Encompass Health                                               66
 IRF clinical information system: improved patient safety      and streamlined operational efficiencies                                                                   Pre-admission assessment                                             Document                            & approval                                             imaging              Treatment plan               • Computerized                 Physician Order                 Entry ("CPOE")               • Clinical Decision                                                                    Referral hospitals                Support ("CDS")                                                      Integrated electronic                                                           medical record          Integrated and                                                                                        Quality reporting         bar-coded point                                                                                        •Uniform data systems       of care medication                                                                                       •Clinical data warehouse           administration                                                                                       •Clinical intelligence                                                                                                                        Discharge planning            Clinical notes                                                                                             and patient education            • Physician            • Nursing            • Therapy            • Care mgmt.                                                                                                       •Patient history                Ancillary services                                                                    •Problems and diagnoses                                                                                                       •Orders and results                                                   Charge and                                         •Plan of care                                           registration services                                      •Workflow alerts and reminders                                              •Registration                                           •Treatment and interventions                                               •Census                          Coordinate care                                               •Coding                       and engage patients                                              •Billing  Encompass Health                                                                                                                             67
 IRF Proprietary management system: Beacon             Operations management tool                    Supply chain procurement    Encompass Health                                                                68
 Home health and hospice information system: Homecare Homebase   Homecare Homebase             Clinical                                     Management and operations   (“HCHB”) was born            •  HCHB manages the entire patient           • Best-in-class data management and                                   workflow and provides field clinicians      reporting ensures managers have access  out of the Company’s             with access to patient records, diagnostic  to relevant data needed to make correct     operating model;              information, and notes from prior visits    decisions.                                   via a mobile application.   HCHB is a leading IT                                                                             • Rules-based algorithms ensure   platform provider in         •  Real-time, customized feedback and          accountability by escalating tasks and  the home health and              instructions provided on-site               notifying management when processes                                                                               are delayed.     hospice industry.          •  Enhances patient data capture and                                   database management which aids in the     •                                   development of algorithms that              Seamless billing with processes in place to                                   can improve the plan of care                ensure claim completeness                                 Sales                                        Compliance                                •  Provides real-time market intelligence to •  Field clinicians are required to adhere to                                   sales area managers, allowing them to        clinical protocols and physician orders,                                   quickly identify the most valuable           ensuring that proper regulatory and     Optimization of               referral sources                             compliance procedures are followed.      capabilities in                                •  Specialty programs integrate individual       leading-edge                                                          •  Internal branch-level audits completed                                   physician protocols into HCHB.               three times a year technology embedded                 – Creates loyalty and incentives for        – HCHB-generated outputs reviewed by    in culture, driving                physicians and facilities, generating      management to identify any branches                                       additional future referrals                requiring additional oversight    superior clinical,                                •  Web-based portal allows referring     operational, and                                   physicians to easily monitor the care and •  Compliance program also involves   financial outcomes.             progress of patients and to sign orders      extensive internal training                                   electronically.     Encompass Health                                                                                                69
 Operational metrics   Encompass Health                        70
 IRF operational metrics: expense efficiencies                                                    •Salaries and benefits includes group medical costs                                                    and is impacted by staffing levels based on patient  (Percent of net operating revenues)               volumes.                                                  •IRF-related expenses includes other operating                                                    expenses (excluding loss on disposal or impairment                                                    of assets), supplies, and occupancy costs.                                                  •Employees per Occupied Bed (“EPOB”) is                                                    calculated by dividing the number of full-time                                                    equivalents, including an estimate of full-time                                                    equivalents from the utilization of contract labor,                                                    by the number of occupied beds during each    50.2     50.4      51.1     50.8      51.1                                                    period. The number of occupied beds is                                                    determined by multiplying the number of licensed                                                    beds by the Company’s occupancy percentage.                                                     21.3     21.0      21.0     21.1      20.6                 Salaries and benefits                          IRF-related expenses        2015          2016             2017         2018         Q1 2019         2015           2016            2017          2018        Q1 2019     3.41      3.44     3.47      3.43     3.34                       EPOB   Encompass Health                                                                              71
 Pre-payment claims denials - inpatient rehabilitation segment  Background                                                              Encompass Health reserves pre-payment claim denials as a reduction of • For several years prior to 2018, under programs designated as         net operating revenues upon notice from a MAC a claim is under review.   “widespread probes,” certain Medicare Administrative Contractors   (“MACs”) conducted pre-payment claim reviews and denied payment for   certain diagnosis codes.                                                              Impact to Income Statement • Encompass Health appeals most denials. On claims it takes to an                                                       Update of                                                                                             Collections of  Revenue    Reserve for   administrative law judge (“ALJ”), Encompass Health historically has   Period  New Denials   Previously   Reserve for    Prior   experienced an approximate 70% success rate.                                              Denied Claims New Denials    Denials   –  MACs identify medical documentation issues as a leading basis for                              (In Millions)      denials.                                                          Q1 2019     $1.6         $(2.5)        $0.5         $—   –  Encompass Health’s investment in clinical information systems and its Q4 2018  4.6         (3.2)         1.4          —      medical services department has further improved its documentation Q3 2018     0.7         (1.3)         0.2          —      and reduced technical denials.                                                                        Q2 2018      1.8         (2.8)         0.5          — • By statute, ALJ decisions are due within 90 days of a request for hearing,                                                                        Q1 2018      3.1         (6.8)         0.9          —   but appeals are taking years. HHS has implemented rule changes to   address the backlog of appeals, but their effect is uncertain.       Q4 2017      0.7         (7.8)         0.2          —                                                                        Q3 2017      7.4         (6.2)         2.2          — • In November 2018, a federal court ordered HHS to reduce the backlog in   the following increments: a 19% reduction by the end of FY 2019; a 49% Q2 2017   16.5         (7.7)         4.9          —   reduction by the end of FY 2020; a 75% reduction by the end of FY 2021; Q1 2017  19.0         (5.9)         5.7          —   and elimination of the backlog by the end of FY 2022.                Q4 2016     17.8         (4.4)         5.4          0.5 • All Medicare providers continue to experience delays resulting in a  Q3 2016     15.7         (8.5)         4.6          —   growing backlog.                                                     Q2 2016     18.7         (4.9)         4.6          —   –  Currently, ALJs are hearing Encompass Health appeals from claims  Q1 2016     22.7         (8.4)         6.0          —      denied up to eight years ago.                                                                                           Impact to Balance Sheet • In late 2017, CMS implemented the Targeted Probe and Educate (“TPE”)   initiative. For more information regarding TPE, see https://                                      March 31,  Dec. 31,  Dec. 31,   www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-                                        2019       2018      2017   Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Targeted-                                          (In Millions)   Probe-and-EducateTPE.html                                                                        Pre-payment claims denials   $   156.1 $    158.1 $  164.0 • Effective February 2018, Palmetto GBA assumed responsibilities for   Recorded reserves                 (46.8)    (47.4)    (49.2)   Cahaba’s MAC jurisdiction. See announcement from CMS at https://   www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-   Net accounts receivable from   Contractors/Downloads/JurisdictionJAwardFactSheet-09082017.pdf         pre-payment claims denials $   109.3 $   110.7 $   114.8   Encompass Health                                                                                                             72
 Post-payment auditor activity - inpatient rehabilitation segment                                    CMS supplements its pre-payment audits with post-payment audits.                       CMS uses Comprehensive Error Rate Testing (“CERT”) auditors to identify trends driving errors.   CMS also uses the CERT error rate to evaluate the performance of Medicare contractors reviewing claims in pre- and post-payment audits.                  Types of post-payment auditors                                                                                          Claims and recoupment Medicare Administrative Contractors (“MACs”) • CMS’s primary audit contractors may audit post-payment claims under TPE. • Sampling and extrapolation may generate large • MACs perform data analysis and probe sampling. They may use statistical    overpayment allegations based on the review of a   sampling and extrapolation at their discretion.                            handful of claims. Recovery Audit Contractors (“RACs”)                                       •  CMS may recover an overpayment by withholding • RACs identify and correct improper payments by reviewing claims based on   future Medicare payments and applying the amount   either a 6-month or 3-year look-back period.                               withheld against the alleged overpayment.  • RACs receive contingency fees based on recovery.                        •  An appeal of a post-payment claim denial does not • RACs provide little or no education on audit findings.                     stop recoupment. Because of the backlog, CMS may                                                                              recoup valid claims before a provider can win an Zone Program Integrity Contractors (“ZPICs”)                                                                              appeal on the merits. • ZPIC auditors review medical records and documentation for claims.      •  If the post-payment denial is overturned on appeal, • CMS or a MAC may refer providers for ZPIC review based on data analytics   the provider recovers recouped amounts, plus   or other concerns about integrity.                                         interest. • ZPIC auditors use claim sampling and extrapolation. Supplemental Medical Review Contractors (“SMRCs”)                                         Impact to balance sheet • SMRCs evaluate medical records to determine whether claims comply with                                Dec. 31,  Dec. 31,  Dec. 31,   coverage, coding, payment and billing guidelines.                                                      2018      2017      2016                                                                                                                 (In Millions)        Post-payment auditors contribute to ALJ backlog                    Net accounts receivable from       u                                                                   post-payment claims denials $     39.0 $    12.5 $    12.8          Claims denied by post-pay auditors are appealed through          Liabilities related to unrecouped          the Medicare appeal process like other claim denials.            post-payment denials              32.4       5.1       2.9          MACs adjudicate all denials at the first level.       u  Audits by multiple auditors seeking overpayments will                           Impact to income statement          continue to clog the appeals pipeline.                                      Post-payment audits have not had a material                                                                                       impact on our 2016-2018 income statements.     Encompass Health                                                                                                             73
 Inpatient rehabilitation operational and labor metrics                                                           Q1             Q4            Q3            Q2            Q1          Full Year                                                       2019            2018          2018          2018          2018           2018                                                                                        (In Millions)        Net patient revenue-inpatient               $      847.6   $      822.8  $      798.4  $      809.6  $      817.1   $     3,247.9        Net patient revenue-outpatient and         other revenues                                     22.5           22.9          27.2          25.0          23.2            98.3        Net operating revenues                      $      870.1   $      845.7  $      825.6  $      834.6  $      840.3   $     3,346.2                                                                                    (Actual Amounts)                                          xxx-xxx                    (18)        Discharges                                        45,609         45,498        44,230        45,010        45,108        179,846        Net patient revenue per discharge           $     18,584   $     18,084  $     18,051  $     17,987  $     18,114   $     18,059        Outpatient visits                                102,028        111,399       119,006       131,041       127,308        488,754        Average length of stay                              12.8           12.5          12.7          12.5          12.7            12.6        Occupancy %                                         72.3%          68.8%         68.9%         70.1%         71.9%           69.3%        # of licensed beds                                 8,941          8,966         8,888         8,848         8,831          8,966        Occupied beds                                      6,464          6,169         6,124         6,202         6,349          6,213                                       (19)        Full-time equivalents (FTEs)                      21,345         21,199        21,119        21,010        20,978         21,076        Contract labor                                       246            266           237           248           285            259        Total FTE and contract labor                      21,591         21,465        21,356        21,258        21,263         21,335              (20)        EPOB                                                3.34           3.48          3.49          3.43          3.35            3.43   Encompass Health                                             Refer to pages 105-107 for end notes.                                           74
 Home health and hospice operational metrics                                                      Q1              Q4              Q3             Q2              Q1           Full Year                                                   2019            2018            2018           2018            2018            2018                                                                                      (In Millions)     Net home health revenue                   $        219.5   $        215.3 $        209.2  $        204.8 $        185.3   $       814.6     Net hospice revenue                                 34.4             35.0           32.8            28.3           20.4           116.5     Net operating revenues                    $        253.9   $        250.3 $        242.0  $        233.1 $        205.7   $       931.1    Home health:                                                                   (Actual Amounts)                (21)    Admissions                                        37,944           35,151         34,364          34,026         33,855         137,396     Recertifications                                  28,282           29,530         28,733          28,089         25,229         111,581     Episodes                                          63,626           64,037         61,765          61,238         56,658         243,698     Average revenue per episode               $        3,057   $        2,972 $        2,995  $        2,968 $        2,934   $       2,968     Episodic visits per episode                         17.7             17.4           17.6            17.5           17.9             17.6     Total visits                                   1,308,610        1,285,150      1,259,055       1,240,490      1,174,950       4,959,645     Cost per visit                            $           75   $           76 $           77  $           76 $           75   $          76    Hospice:                (22)    Admissions                                         2,378            2,030          2,054           1,797          1,593           7,474     Patient days                                     239,022          231,515        223,834         192,404        143,231         790,984     Revenue per day                           $          144   $          151 $          147  $          148 $          142   $         147   Encompass Health                                             Refer to pages 105-107 for end notes.                                           75
 Payment sources (percent of revenues)                                          Inpatient                                       Rehabilitation      Home Health and               Consolidated                                         Segment           Hospice Segment                                              Q1                    Q1                    Q1            Full Year                                       2019       2018       2019       2018       2019       2018       2018     Medicare                             73.5%      74.4%      84.6%      86.1%      76.0%      76.6%      75.9%     Medicare Advantage                    9.8%       8.6%      10.0%       9.7%       9.8%       8.8%       9.2%     Managed care                          9.6%      10.1%       3.3%       3.7%       8.2%       8.9%       8.8%     Medicaid                              3.0%       2.9%       1.7%       0.2%       2.7%       2.4%       2.6%     Other third-party payors              1.1%       1.4%        —%         —%        0.9%       1.1%       1.1%     Workers’ compensation                 0.9%       0.9%       0.1%        —%        0.7%       0.7%       0.7%     Patients                              0.7%       0.5%       0.2%       0.2%       0.6%       0.5%       0.5%     Other income                          1.4%       1.2%       0.1%       0.1%       1.1%       1.0%       1.2%       Total                             100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%   Encompass Health                                                                                                76
 Industry structure   Encompass Health                                                                                                                             77
 Overall healthcare spending     National healthcare spending: $3,263 billion in 2017       (billions)                       $168         Investment                        $45         Government administration                        $89         Government public health                        $452         Retail of medical products                         $97         Home health care                       $183         Other health, residential and personal care                         $920         Professional services                         $166         Nursing care facilities and continuing care retirement communities                                      Hospital care                      $1,143            Personal healthcare: $2,961 Personal Includes inpatient rehabilitation, long-term care hospitals      Health  consumption spending*: $3,095   Encompass Health    Source: Centers for Medicare & Medicaid Services, National Health Expenditure Data (Historical), Table 2 - 2017 78                                    * Excludes Net Cost of Private Health Insurance of $229.5 billion.
 Medicare 2017 spending = $710 billion                         $8 billion (1%)                        in billions               Inpatient rehabilitation hospitals                 (Included in inpatient hospitals)                                                              $  28       Skilled nursing               Medicare Part A                                                              $145        Inpatient hospital                      4%                                         20%                                                              $69         Physician payments                                                                                                        Medicare Part B          14%                                                 $53         Outpatient hospital                                                               $18         Home health                                                              $18         Hospice                     Medicare Parts A&B                                                   10%        $69         Other services                                                    7%         $210        Medicare managed              Medicare Part C                                                                             care          29%                                                3%                                             3%                                    10%                       $100        Outpatient Rx                 Medicare Part D    Inpatient hospital includes spending for acute care hospitals along with inpatient rehabilitation and long-term acute care hospital  services. In 2017, Medicare spent $7.9 billion and $4.5 billion, respectively for inpatient rehabilitation and long-term acute care  hospital services.                               Source: Centers for Medicare & Medicaid Services, Medicare Trustees’ Report July 2018 – page 11; and  Encompass Health                  MedPAC, Medicare Payment Policy, March 2019 - pages 193, 227, 251, 281, and 311            79
 Continuum of healthcare services   Preventive           Ambulatory           Acute              Post-acute           Palliative  Routine health care  Medical care         Medical            Medical care         Medical care  (screenings, check-  delivered on an      treatment of       provided after a     that is focused ups, patient         outpatient basis     diseases for       period of acute      on providing counseling) to       (blood tests, X-     which a patient    care (long-term      relief from the prevent illnesses,                      rays, endoscopy,     is treated for a   acute care,          symptoms and disease, or other    certain biopsies,                       inpatient            stress of a                                           brief but severe health problems.     certain surgical                        rehabilitation,      serious illness                                           episode of                      procedures)                             skilled nursing,     (hospice) Home health and                           illness care management                                              home health) services to prevent or reduce acute admissions.   Encompass Health                                                                                      80
 Post-acute fee-for-service care services                                                       (Highest acuity)                                          (Lowest acuity)                                                     Long-term              Inpatient               Skilled            Acute care                                                                                                 Home                                  Discharge         acute care          rehabilitation            nursing               hospital                                                                                               health                                                     hospital              hospital              facility                 Medicare spending (billions)              $4.5                 $7.9                 $28.4                 $17.7*                     # of Discharges                  ~116,000              ~380,000             ~2,300,000           ~3,400,000                      Length of stay                  26.3 days             12.7 days            37.3 days                N/A                      # of Providers                    ~400                 ~1,180               ~15,100               ~12,000                                                    For-profit (78%)      For-profit (33%)      For-profit (71%)                 Facility ownership mix**          Non-profit (18%)      Non-profit (56%)     Non-profit (23%)      For-profit (88%)                                                      Gov’t (4%)           Gov’t (11%)           Gov’t (6%)         Non-profit (12%)                                                                        Free-standing (24%)   Free-standing (96%)  Free-standing (85%)             Free-standing vs. hospital based            N/A           Hospital based (76%)  Hospital based (4%)  Hospital based (15%)                                                      Urban (95%)           Urban (87%)          Urban (73%)           Urban (83%)                    Rural vs. urban**                 Rural (5%)           Rural (13%)           Rural (27%)          Rural (17%)                                                * Not all home health spending occurs as a post-acute service.                              ** Facility ownership mix / rural vs. urban - home health data represents freestanding agencies only.   Encompass Health             Source: MedPAC, Medicare Payment Policy, March 2019 - pages 193, 197, 213, 227, 234, 251, 262, 263, 281, 287,   81                                     and 290; MedPAC, Health Care Spending and the Medicare Program, June 2018 - page 121
 Medicare fee-for-service spending on post-acute services             6        4.8                                                                                                           Home health fee-for-                                 4.3          4.1          4.1         )                                                              3.9          3.8          3.7                             service spending* (% of         t                                                                                                     3.5         n          e                                                                                                                        total Medicare spending)         c         r          e 3         P         (                                                                                                                       Inpatient rehabilitation                    1.6          1.5          1.5          1.6          1.5          1.6          1.6          1.6               fee-for-service spending           0                                                                                                                     (% of total Medicare                   2010         2011         2012         2013         2014         2015         2016         2017               spending)                Total Medicare fee-for-service spending on post-acute services ~$59 billion in 2017                                                                                                                                                           Projected $35                                                                                                                                          2017           2019                                                                                                                     Post-acute            Medicare        Medicare $30                                                                                                                   settings             margin**       margin**  $25                                                                                                            Skilled nursing facilities    11.2%           10.0%  $20                                                                                                                Home health agencies*         15.2%           16.0% $15  $10                                                                                                                Inpatient rehabilitation      13.8%           11.6%                                                                                                                hospitals  $5                                                                                                                Long-term acute care  $0                                                                                                                hospitals                      4.6%             1.2%***        2002  2003  2004 2005  2006  2007 2008  2009 2010  2011  2012 2013  2014  2015 2016  2017                                                          * Not all home health spending occurs as a post-acute service.              ** 2017 Medicare margin / Projected 2019 Medicare margin - skilled nursing and home health data represents freestanding facilities and agencies only.                      *** 2019 LTCH Projected Medicare margin reflects margin estimates for full qualifying LTCH PPS cases only, not site-neutral rate cases.     Encompass Health               Source: MedPAC, Medicare Payment Policy, March 2019 – pages 183, 193, 211, 215, 227, 243, 245, 251, 274, 281, and 301            82
 Different fee-for-service levels of services                    Inpatient rehabilitation hospital                                       Nursing home  Average length of stay                             = 12.7 days     Average length of stay                                         = 37.3 days Discharge to community                          = 76.0%            Discharge to community                       = 40.0% Requirements:                                                      Requirements:  IRFs must also satisfy regulatory/policy requirements for hospitals, No similar requirement; Nursing homes are regulated as nursing including Medicare hospital conditions of participation.           homes only  All patients must be admitted by a rehab physician.                No similar requirement  Rehab physicians must re-confirm each admission within 24 hours.   No similar requirement  All patients, regardless of diagnoses/condition, must demonstrate need No similar requirement and receive at least three hours of daily intensive therapy.                                                                     No similar requirement; some SNF patients may go a week or All patients must see a rehabilitation physician “in person” at least longer without seeing a physician, and often a non- three times weekly.                                                rehabilitation physician.  IRFs are required to provide 24 hour, 7 days per week nursing care; many nurses are RNs and rehab nurses.                              No similar requirement  IRFs are required to use a coordinated interdisciplinary team approach No similar requirement; Nursing homes are not required to led by a rehab physician; includes a rehab nurse, a case manager, and a licensed therapist from each therapy discipline who must meet weekly provide care on a interdisciplinary basis and are not required to to evaluate/discuss each patient’s case.                           hold regular meetings for each patient. IRFs are required to follow stringent admission/coverage policies and Nursing homes have comparatively few policies governing the must carefully document justification for each admission; further  number or types of patients they treat. restricted in number/type of patients (60% Rule).    Encompass Health               Source: MedPAC, Medicare Payment Policy, March 2019 - pages 203, 213, 263, and 267.           83
 Supply of IRFs is relatively stable                   Share of                 Medicare                        Number of IRFs                              Average annual change                   FFS                discharges                                                                 2009-     2013-    2016-  Type of IRF     2017        2009     2013      2014      2015      2016      2017         2013     2016     2017     All IRFs       100%      1,196     1,161     1,177     1,182     1,188    1,178         -0.7%    0.8%     -0.8%     Urban           93        992       977      1,013     1,020     1,026    1,019         -0.4      1.6      -0.7     Rural          7         204       184       164       162       162      159          -2.5     -4.2      -1.9  Freestanding       52        225       243       251       262       273      279           0.8      4.0      2.2 Hospital based     48        971       918       926       920       915      899          -1.4     -0.1      -1.7    Nonprofit        39        732       677       681       681       676      655          -1.9       —       -3.1   For profit       54        295       322       338       352       370      392           2.2      4.7      5.9  Government        7         169       155       149       138       133      125          -2.1     -5.0      -6.0    Encompass Health                   Source: MedPAC, Medicare Payment Policy, March 2019 - page 262               84
 Inpatient rehabilitation sector margins                                          Aggregate FFS Medicare IRF margins remained high in 2017                     Share of                     Medicare                     fee-for-                                       Margins                      service                    discharges  Type of IRF          2017      2004     2006     2008     2010      2012     2014     2015     2016     2017   All IRFs             100%      16.7%    12.5%     9.4%     8.6%    11.2%     12.2%    13.9%    13.3%    13.8%   Urban                 93       17.0      12.8     9.6      9.0      11.6     12.6     14.3      13.6     14.2  Rural                 7        13.2      9.0      7.2      4.7       6.3      6.4      8.6      9.4      8.4   Freestanding          53       24.7      17.5     18.2     21.4     23.9     25.2     26.7      25.8     25.5  Hospital based        47       12.2      9.9      3.8      -0.6      0.7      0.7      2.2      0.9      1.5   Nonprofit             38       12.8      10.9     5.3      2.1       2.1      1.7      3.5      1.6      2.2  For profit            55       24.4      16.3     16.8     19.6     22.9     23.6     24.9      24.2     23.8  Government            7         N/A      N/A      N/A      N/A      N/A      N/A       N/A      N/A      N/A   Number of beds    1 to 10             2         3.7      -3.6     -4.9    -10.3     -6.9     -10.9     -7.5     -9.9    -10.5    11 to 24            21       10.5      7.3      1.2      -3.3     -1.2     -0.3      -0.4     -0.2     0.6    25 to 64            48       18.3      13.7     10.0     10.6     12.3     14.0     16.0      15.0     15.8    65 or more          29       21.5      17.8     17.4     17.5     21.0     20.6     23.1      22.4     21.9   Encompass Health                    Source: MedPAC, Medicare Payment Policy, March 2019 - page 270              85
 “60% Rule”: Medicare regulation for IRFs         The 60% Rule requires at least 60% of all patients admitted must have at least        one medical diagnosis or functional impairment from a list of 13 compliant        conditions (a.k.a. “compliant conditions” or “CMS-13”).    1983                             2002                    2004                          2007   1983: 75% Rule                                                                            2007: 75% Rule established –                          2002: IRF              2004: “New” 75%            permanently changed to requires 75% of IRF                          reimbursement          Rule initiated with        “60% Rule” with passage patients to have a                          transitions to         a “new” list of            of “Medicare, Medicaid qualifying condition                          prospective            “qualifying                & SCHIP Extension Act of if the IRF is to                          payment system         conditions”                2007” maintain                          (“PPS”) reimbursement on a “cost plus” basis vs.                                 2002: CMS suspends                   Paid for through a “prospective”                                 75% Rule                         Medicare price rollback & ( i.e., fixed) basis.                                 implementation                     18-month freeze from                                                                    4/1/2008 to 9/30/2009  Encompass Health                                                                              86
 IRF qualifying conditions       Original qualifying conditions                    Current qualifying conditions    1.   Stroke                                  1.   Stroke   2.   Brain injury                            2.   Brain injury   3.   Amputation                              3.   Amputation   4.   Spinal cord                             4.   Spinal cord   5.   Fracture of the femur                   5.   Fracture of the femur   6.   Neurological disorder                   6.   Neurological disorder   7.   Multiple trauma                         7.   Multiple trauma   8.   Congenital deformity                    8.   Congenital deformity   9.   Burns                                   9.   Burns                                                10.  Osteoarthritis (after less intensive setting)                                                11.  Rheumatoid arthritis (after less intensive setting)   10.  Polyarthritis (includes “joint                                  Became        12.  Joint replacement       replacement”)                                   ■  Bilateral                                                       ■  Age ≥ 85                                                       ■  Body Mass Index >50                                                13.  Systemic vasculidities (after less-intensive setting)        Since the implementation of the 60% Rule in 2007, the relative number of lower extremity fractures and             lower extremity joint replacements treated in the Company’s IRFs has declined significantly.                                              % of the Company’s Medicare discharges     Lower extremity:       2005       2007      2009       2011      2013      2015       2017     Fractures (RIC 07)     13.1%     14.8%      13.6%     11.6%      10.2%     9.8%       8.9% Joint replacements (RIC 08) 17.9%    11.8%      9.0%       7.6%      6.7%      5.5%       3.7%  Encompass Health                                                                              87
 Inpatient rehabilitation outlier payments(7)                                    # of IRFs                        Total outlier payments                     Avg outlier payment per discharge                                                                       Non-                                                    Non-                                    Non-              IRF       Encompass Encompass           Encompass     Encompass                                 Encompass     Encompass            deciles      Health    Health   Total       Health         Health           Total         %         Health         Health      Total            90-100             —       112     112   $         —  $   134,977,428 $   134,977,428   52.7%         N/A       $      3,072 $  3,072             80-90             2       110     112   $    705,836 $    46,878,724 $    47,584,560   18.6%    $       1,373  $      1,316 $  1,317             70-80             1       112     113   $    237,706 $    27,515,884 $    27,753,590   10.8%    $         113  $       895  $    845             60-70             5       108     113   $    815,666 $    16,985,379 $    17,801,045     7.0%   $         170  $       525  $    480             50-60             7       106     113   $    715,301 $    10,810,889 $    11,526,190     4.5%   $          96  $       416  $    345             40-50             9       104     113   $    546,134 $     6,900,730 $     7,446,864     2.9%   $          54  $       274  $    212             30-40            19        94     113   $    810,929 $     3,917,683 $     4,728,612     1.9%   $          45  $       144  $    105             20-30            29        84     113   $    755,957 $     2,168,627 $     2,924,584     1.1%   $          31  $       113  $     67             10-20            27        85     112   $    308,975 $       871,995 $     1,180,970     0.5%   $          12  $        42  $     26       More Efficient Less 0-10 27       85     112   $     39,483 $        61,960 $       101,443      —%    $           1  $          3 $      2              Totals          126     1,000   1,126   $  4,935,987 $   251,089,299 $   256,025,286  100.0%           Outlier observations:          •  10% of IRFs receive 53% of the outlier payments; none of the 10% are Encompass Health IRFs.           •  The Company receives 1.9% of the IRF outlier payments despite treating approx. 30% of the             Medicare patients/discharges.          •  As a result of outlier payments, CMS pays the Company approx. $845 less per discharge than other             providers.          •  Capping the IRF industry outlier payments at 10% of each IRF’s total Medicare payments could save             Medicare approx. $651 million over 10 years.  Encompass Health                                         Refer to pages 105-107 for end notes.                                               88
 Segment operating results   Encompass Health                        89
 Inpatient rehabilitation segment Adjusted EBITDA                                                      Q1            Q4           Q3           Q2           Q1         Full Year     (In millions)                                  2019          2018         2018         2018         2018         2018     Net operating revenues:      Inpatient                                 $     847.6   $     822.8  $     798.4  $     809.6  $     817.1   $   3,247.9      Outpatient and other                             22.5          22.9         27.2         25.0         23.2          98.3        Total segment revenue                         870.1         845.7        825.6        834.6        840.3       3,346.2     Operating expenses:       Salaries and benefits                          (445.0)      (437.2)       (423.6)      (416.5)      (424.2)     (1,701.5)                                   % of revenue        51.1%         51.7%        51.3%        49.9%        50.5%         50.8%       Other operating expenses(a)                    (127.6)      (128.2)       (124.3)      (126.9)      (122.9)      (502.3)       Supplies                                        (35.6)        (36.4)       (33.6)       (34.7)       (35.9)      (140.6)       Occupancy costs                                 (15.8)        (16.4)       (15.9)       (16.0)       (15.5)       (63.8)                                                      (179.0)      (181.0)       (173.8)      (177.6)      (174.3)      (706.7)                                   % of revenue        20.6%         21.4%        21.1%        21.3%        20.7%         21.1%     Equity in nonconsolidated affiliates               2.1           2.0          1.9          1.6          2.0           7.5     Other income(b)                                    2.8           0.1          1.8          1.2          0.5           3.6     Noncontrolling interests                          (21.0)        (17.9)       (19.0)       (19.8)       (20.5)       (77.2)     Segment Adjusted EBITDA                    $     230.0   $     211.7  $     212.9  $     223.5  $     223.8   $     871.9      In arriving at Adjusted EBITDA, the following     was excluded: (a) Loss (gain) on disposal of assets          $       1.1   $       3.5  $       (1.0) $      2.4  $       0.8   $       5.7 (b) Change in fair market value of equity       securities                               $       (0.9) $       0.8  $       0.1  $       0.4  $       0.6   $       1.9   Encompass Health                                  Reconciliations to GAAP provided on pages 95-102.                          90
 Home health and hospice segment Adjusted EBITDA                                                     Q1            Q4            Q3           Q2            Q1         Full Year     (In Millions)                                2019          2018          2018         2018          2018          2018     Net operating revenues:       Home health revenue                    $     219.5   $      215.3  $     209.2  $      204.8  $     185.3   $      814.6       Hospice revenue                                34.4          35.0          32.8         28.3          20.4         116.5        Total segment revenue                       253.9          250.3        242.0         233.1        205.7          931.1     Operating expenses       Cost of services                             (116.5)       (116.1)       (114.6)      (109.1)        (98.6)       (438.4)                                 % of revenue         45.9%         46.4%         47.4%        46.8%         47.9%         47.1%       Support and overhead costs(a)                 (88.8)        (88.3)        (82.4)       (80.8)        (72.0)       (323.5)                                 % of revenue         35.0%         35.3%         34.0%        34.7%         35.0%         34.7%                                                    (205.3)       (204.4)       (197.0)      (189.9)       (170.6)       (761.9)                                 % of revenue         80.9%         81.7%         81.4%        81.5%         82.9%         81.8%     Other income                                       —             —             —           0.5            —            0.5     Equity in net income of nonconsolidated       affiliates                                      0.4           0.3           0.2          0.4           0.3           1.2     Noncontrolling interests(b)                      (2.7)         (2.1)         (2.0)        (2.5)         (1.9)         (8.5)     Segment Adjusted EBITDA                  $      46.3   $       44.1  $      43.2  $       41.6  $      33.5   $     162.4      In arriving at Adjusted EBITDA, the     following was excluded: (a) Payroll taxes on SARs exercise           $        0.2  $         —   $         —  $         —   $         —   $         — (b) SARs mark-to-market impact on       noncontrolling interests (see page 65) $       (0.8) $       (0.4) $       (0.3) $      (0.9) $       (1.0) $       (2.6)   Encompass Health                                  Reconciliations to GAAP provided on pages 95-102.                          91
 Segment operating results                                                              Q1 2019                                                Q1 2018                                                        Home                                                   Home                                                      Health and                                             Health and (In Millions)                               IRF       Hospice     Reclasses   Consolidated         IRF       Hospice      Reclasses   Consolidated Net operating revenues                  $     870.1 $      253.9 $         —  $     1,124.0   $      840.3 $      205.7 $         —  $     1,046.0 Operating Expenses:     Inpatient Rehabilitation:       Salaries and benefits                  (445.0)          —        (175.6)       (620.6)        (424.2)          —        (146.0)       (570.2)       Other operating expenses(a)            (127.6)          —         (21.4)       (149.0)        (122.9)          —         (17.5)       (140.4)       Supplies                                (35.6)          —          (4.5)        (40.1)         (35.9)          —          (4.0)         (39.9)       Occupancy                               (15.8)          —          (3.8)        (19.6)         (15.5)          —          (3.1)         (18.6)     Home Health and Hospice:       Cost of services sold (excluding         depreciation and amortization)           —        (116.5)       116.5             —             —         (98.6)        98.6             —       Support and overhead costs(b)              —         (88.8)        88.8             —             —         (72.0)        72.0             —                                              (624.0)      (205.3)          —         (829.3)        (598.5)      (170.6)          —         (769.1) Other income(c)                                 2.8           —            —            2.8            0.5           —            —            0.5 Equity in net income of nonconsolidated   affiliates                                    2.1          0.4           —            2.5            2.0          0.3           —            2.3 Noncontrolling interests(d)                   (21.0)        (2.7)          —          (23.7)         (20.5)        (1.9)          —           (22.4)     Segment Adjusted EBITDA             $    230.0  $      46.3  $         —         276.3    $     223.8  $       33.5 $         —          257.3 General and administrative expenses(e)(f)                                             (33.4)                                                  (34.0)     Adjusted EBITDA                                                           $      242.9                                           $       223.3    In arriving at Adjusted EBITDA, the following were excluded: (a) Loss on disposal of assets          $       1.1 $         —  $         —  $         1.1   $        0.8 $         —  $         —  $         0.8 (b) Payroll taxes on SARs exercise      $        —  $        0.2 $         —  $         0.2   $         —  $         —  $         —  $           — (c) Change in fair market value of      $      (0.9) $        —  $         —  $        (0.9)  $        0.6 $         —  $         —  $         0.6       equity securities (d) SARs mark-to-market impact on       $        —  $       (0.8) $        —  $        (0.8)  $         —  $       (1.0) $        —  $         (1.0)       noncontrolling interests (see page       65) (e) Stock-based compensation            $        —  $         —  $         —  $        19.4   $         —  $         —  $         —  $        26.1 (f) Transaction costs                   $        —  $         —  $         —  $         0.6   $         —  $         —  $         —  $         1.0    Encompass Health                                         Reconciliations to GAAP provided on pages 95-102                                    92
 Segment operating results                                                                                                  Year Ended December 31, 2018                                                                                                  Home Health (In Millions)                                                                         IRF         and Hospice      Reclasses      Consolidated Net operating revenues                                                          $       3,346.2 $         931.1 $             —  $      4,277.3 Operating Expenses:      Inpatient Rehabilitation:        Salaries and benefits                                                           (1,701.5)              —          (652.5)        (2,354.0)        Other operating expenses(a)                                                       (502.3)              —           (77.1)         (579.4)        Supplies                                                                          (140.6)              —           (18.1)         (158.7)        Occupancy                                                                          (63.8)              —           (14.2)           (78.0)      Home Health and Hospice:        Cost of services sold (excluding depreciation and amortization)                       —           (438.4)          438.4               —        Support and overhead costs                                                            —           (323.5)          323.5               —                                                                                        (2,408.2)         (761.9)              —         (3,170.1) Other income(b)                                                                             3.6             0.5               —             4.1 Equity in net income of nonconsolidated affiliates                                          7.5             1.2               —             8.7 Noncontrolling interests(c)                                                               (77.2)           (8.5)              —            (85.7)      Segment Adjusted EBITDA                                                    $        871.9  $        162.4  $             —         1,034.3 General and administrative expenses(d)(e)                                                                                                (133.3)      Adjusted EBITDA                                                                                                             $        901.0    In arriving at Adjusted EBITDA, the following were excluded: (a)  Loss on disposal of assets                                                 $           5.7 $             — $             —  $          5.7 (b)  Change in fair market value of equity securities                           $           1.9 $             — $             —  $          1.9 (c)  SARs mark-to-market impact on noncontrolling interests (see page 65)       $            —  $          (2.6) $            —  $          (2.6) (d)  Stock-based compensation                                                   $            —  $             — $             —  $         85.9 (e)  Transaction costs                                                          $            —  $             — $             —  $          1.0   Encompass Health                                         Reconciliations to GAAP provided on pages 95-102                                    93
 Reconciliations to GAAP            and share information   Encompass Health                        94
 Reconciliation of net income to Adjusted EBITDA(9)                                                                                                                         2019                                                                                                                         Q1         (in millions, except per share data)                                                                  Total          Per Share         Net Income                                                                                       $         125.2         Loss from disc ops, net of tax, attributable to Encompass Health                                              0.5         Net income attributable to noncontrolling interests                                                         (22.9)         Income from continuing operations attributable to Encompass Health*                                        102.8  $           1.04         Provision for income tax expense                                                                            30.8         Interest expense and amortization of debt discounts and fees                                                37.2         Depreciation and amortization                                                                               52.5         Net noncash loss on disposal of assets                                                                        1.1         Stock-based compensation expense                                                                            19.4         Transaction costs                                                                                             0.6         SARs mark-to-market impact on noncontrolling interests (see page 65)                                         (0.8)         Change in fair market value of equity securities                                                             (0.9)         Payroll taxes on SARs exercise                                                                                0.2         Adjusted EBITDA                                                                                  $         242.9          Weighted average common shares outstanding:         Basic                                                                                                                         98.4         Diluted                                                                                                                       99.7                                * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Encompass Health                                                                                                                             95                                                          Refer to pages 105-107 for end notes.
 Reconciliation of net income to Adjusted EBITDA(9)                                                                                                 2018                                                         Q1                  Q2                 Q3                 Q4              Full Year                                                              Per                Per                Per                Per                 Per (in millions, except per share data)               Total    share     Total    share     Total    share     Total    share      Total    share Net Income                                       $  105.2           $  113.2            $ 109.3            $   47.7           $  375.4 Loss (income) from disc ops, net of tax,   attributable to Encompass Health                    0.5                (0.2)              0.1                (1.5)              (1.1) Net income attributable to noncontrolling interests (21.4)             (21.4)              (20.7)             (19.6)             (83.1) Income from continuing operations attributable   to Encompass Health*                               84.3 $   0.85      91.6  $  0.92      88.7  $   0.89      26.6 $   0.26     291.2 $   2.92 Gov’t, class action, and related settlements            —                  —                  —                52.0               52.0 Provision for income tax expense                     30.0               29.3               30.2                29.4              118.9 Interest expense and amortization of debt   discounts and fees                                 35.6               37.7               37.3                36.7              147.3 Depreciation and amortization                        45.9               49.7               51.2                52.9              199.7 Net noncash loss (gain) on disposal of assets         0.8                2.4                (1.0)               3.5                5.7 Stock-based compensation expense                     26.1               21.4               18.1                20.3               85.9 Transaction costs                                     1.0                  —                  —                  —                 1.0 SARs mark-to-market impact on noncontrolling    interests (see page 65)                           (1.0)               (0.9)              (0.3)              (0.4)              (2.6) Change in fair market value of equity securities      0.6                0.4                0.1                 0.8                1.9 Adjusted EBITDA                                  $  223.3           $  231.6            $ 224.3            $ 221.8            $  901.0  Weighted average common shares outstanding: Basic                                                         97.8               97.9                98.0               98.0               97.9 Diluted                                                       99.4               99.6              100.0               100.0               99.8                                * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Encompass Health                                                                                                                             96                                                          Refer to pages 105-107 for end notes.
 Reconciliation of segment Adjusted EBITDA to income    from continuing operations before income tax expense                                                                         Q1        Q4       Q3       Q2       Q1       Full Year                                                                      2019      2018     2018     2018     2018       2018       (in millions)       Total segment Adjusted EBITDA                                $  276.3  $ 255.8  $  256.1 $  265.1 $  257.3  $   1,034.3       General and administrative expenses                             (53.4)    (54.3)   (49.9)   (54.9)   (61.1)      (220.2)       Depreciation and amortization                                   (52.5)    (52.9)   (51.2)   (49.7)   (45.9)      (199.7)       (Loss) gain on disposal of assets                                 (1.1)    (3.5)     1.0     (2.4)     (0.8)        (5.7)       Government, class action, and related settlements                   —     (52.0)       —        —        —        (52.0)       Interest expense and amortization of debt discounts and fees    (37.2)    (36.7)   (37.3)   (37.7)   (35.6)      (147.3)       Net income attributable to noncontrolling interests              22.9      19.6     20.7     21.4     21.4         83.1       SARs mark-to-market impact on noncontrolling interests (see        page 65)                                                         0.8       0.4      0.3      0.9      1.0          2.6       Change in fair market value of equity securities                  0.9      (0.8)    (0.1)    (0.4)     (0.6)        (1.9)       Payroll taxes on SARs exercise                                    (0.2)      —         —        —        —            —        Income from continuing operations before income tax expense  $  156.5  $   75.6 $  139.6 $  142.3 $  135.7  $     493.2   Encompass Health                                                                                                             97
 Adjusted EPS(10) - Q1 2019                                                                     For the Three Months Ended March 31, 2019                                                                                   Adjustments                                                            Mark-to-                                                            Market                                   Change in    Payroll                                                         Adjustment for                             Fair Market    Taxes                                                             Stock                                    Value of      on                                                 As      Compensation     Income Tax   Transaction     Equity      SARs        As                                              Reported      Expense      Adjustments      Costs      Securities  Exercise  Adjusted                                                                      (In Millions, Except Per Share Amounts) Adjusted EBITDA                              $  242.9   $           —   $         —   $        —   $         —  $      —  $  242.9 Depreciation and amortization                    (52.5)             —             —            —             —         —      (52.5) Interest expense and amortization of debt   discounts and fees                             (37.2)             —             —            —             —         —      (37.2) Stock-based compensation                         (19.4)            9.6            —            —             —         —       (9.8) Loss on disposal of assets                        (1.1)             —             —            —             —         —       (1.1) Transaction costs                                 (0.6)             —             —           0.6            —         —         — SARs mark-to-market impact on noncontrolling   interests (see page 65)                          0.8            (0.8)           —            —             —         —         — Change in fair market value of equity   securities                                       0.9              —             —            —           (0.9)       —         — Payroll taxes on SARs exercise                    (0.2)             —             —            —             —       0.2         —     Income from continuing operations      before income tax expense                  133.6              8.8            —           0.6          (0.9)     0.2      142.3 Provision for income tax expense                 (30.8)           (2.4)         (5.2)        (0.2)         0.2         —      (38.4)     Income from continuing operations      attributable to Encompass Health        $  102.8   $          6.4  $       (5.2) $       0.4  $      (0.7) $    0.2  $  103.9     Add: Interest, amortization, and loss on      extinguishment of convertible debt, net      of tax                                         —                                                                             —     Numerator for diluted earnings per share $  102.8                                                                     $   103.9 Diluted earnings per share from continuing   operations, as reported*                   $   1.04   $        0.06   $      (0.05) $        —   $     (0.01) $      —  $    1.04 Diluted shares used in calculation               99.7     Encompass Health                Reconciliation to GAAP provided on pages 95-102. Refer to pages 105-107 for end notes.       98                                                * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - Q1 2018                                                                       For the Three Months Ended March 31, 2018                                                                                    Adjustments                                                              Mark-to-Market                                Change in                                                              Adjustment for                               Fair Market                                                                   Stock                                    Value of                                                      As      Compensation      Income Tax   Transaction     Equity         As                                                  Reported       Expense       Adjustments      Costs       Securities   Adjusted                                                                       (In Millions, Except Per Share Amounts) Adjusted EBITDA                                  $   223.3  $             —   $         —   $        —   $          —  $   223.3 Depreciation and amortization                         (45.9)              —             —            —              —       (45.9) Interest expense and amortization of debt discounts  and fees                                             (35.6)              —             —            —              —       (35.6) Stock-based compensation                              (26.1)            11.6            —            —              —       (14.5) Loss on disposal of assets                             (0.8)              —             —            —              —        (0.8) Transaction costs                                      (1.0)              —             —           1.0             —          — SARs mark-to-market impact on noncontrolling  interests (see page 65)                               1.0              (1.0)           —            —              —          — Change in fair market value of equity securities       (0.6)              —             —            —            0.6          —    Income from continuing operations before      income tax expense                              114.3              10.6            —           1.0           0.6      126.5 Provision for income tax expense                      (30.0)            (3.0)         (0.2)        (0.3)          (0.2)     (33.7)    Income from continuing operations      attributable to Encompass Health            $    84.3  $            7.6  $       (0.2) $       0.7  $        0.4  $    92.8    Add: Interest, amortization, and loss on      extinguishment of convertible debt, net of tax      —                                                                     —    Numerator for diluted earnings per share      $    84.3                                                             $    92.8 Diluted earnings per share from continuing  operations, as reported*                        $    0.85  $          0.08   $         —   $      0.01  $          —  $    0.93 Diluted shares used in calculation                    99.4    Encompass Health                Reconciliation to GAAP provided on pages 95-102. Refer to pages 105-107 for end notes.       99                                              * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - 2018                                                                         For the Year Ended December 31, 2018                                                                                       Adjustments                                                                        Mark-to-Market                                  Change in                                                        Government,     Adjustment for                                 Fair Market                                                        Class Action,        Stock                                      Value of                                               As         & Related      Compensation      Income Tax    Transaction     Equity        As                                            Reported     Settlements       Expense        Adjustments       Costs       Securities  Adjusted                                                                         (In Millions, Except Per Share Amounts)  Adjusted EBITDA                          $   901.0   $            —   $             —   $          —   $        —   $          —  $  901.0  Depreciation and amortization                (199.7)              —                 —              —            —              —     (199.7)  Government, class action, and related    settlements                                 (52.0)           52.0                 —              —            —              —          —  Interest expense and amortization of debt    discounts and fees                         (147.3)              —                 —              —            —              —     (147.3)  Stock-based compensation                      (85.9)              —              31.2              —            —              —      (54.7)  Loss on disposal of assets                     (5.7)              —                 —              —            —              —       (5.7)  Transaction costs                              (1.0)              —                 —              —           1.0             —          —  SARs mark-to-market impact on    noncontrolling interests (see page 65)        2.6               —               (2.6)            —            —              —          —  Change in fair market value of equity     securities                                  (1.9)              —                 —              —            —            1.9          —      Income from continuing operations        before income tax expense               410.1            52.0              28.6              —           1.0           1.9      493.6  Provision for income tax expense             (118.9)              —               (8.0)          (3.3)        (0.3)          (0.5)   (131.0)      Income from continuing operations        attributable to Encompass Health   $   291.2   $         52.0   $          20.6   $       (3.3)  $       0.7  $        1.4  $  362.6      Add: Interest, amortization, and loss        on extinguishment of convertible        debt, net of tax                            —                                                                                       —      Numerator for diluted earnings per        share                              $   291.2                                                                                $  362.6  Diluted earnings per share from    continuing operations, as reported*    $     2.92  $         0.52   $          0.21   $      (0.03)  $     0.01   $       0.01  $    3.63  Diluted shares used in calculation             99.8  Encompass Health                    Reconciliation to GAAP provided on pages 95-102. Refer to pages 105-107 for end notes.                 100                                                   * Adjusted EPS may not sum across due to rounding.
 Adjusted Free Cash Flow History(11)                                                                                     Q1                Full Year    (In Millions)                                                           2019        2018          2018    Net cash provided by operating activities                             $    159.9 $    216.3  $         762.4    Impact of discontinued operations                                            3.0        0.7              (0.8)     Net cash provided by operating activities of continuing operations         162.9      217.0            761.6    Capital expenditures for maintenance                                       (29.6)      (36.1)         (152.9)     Distributions paid to noncontrolling interests of consolidated affiliates  (19.5)      (15.4)          (75.4)     Items non-indicative of ongoing operating performance:    Transaction costs and related assumed liabilities                            0.6        0.4              0.5    Cash paid for SARs exercise                                                 13.4        4.3              4.3    Adjusted free cash flow                                               $   127.8  $    170.2  $         538.1     Cash dividends on common stock(12)                                    $    28.3  $     25.4  $         100.8              Information regarding investing and financing categories of the statement of cash flows for the periods presented can be found on            Encompass Health’s website in the Earnings Releases for those periods.  Encompass Health                            Refer to pages 105-107 for end notes.                              101
 Net cash provided by operating activities reconciled       to Adjusted EBITDA                                                                   Q1                              Full Year  (In Millions)                                             2019      2018      2018      2017      2016      2015      2014  Net cash provided by operating activities               $  159.9  $  216.3  $  762.4  $  658.3  $  640.2  $  505.9  $  458.9  Professional fees — accounting, tax, and legal                 —         —         —         —       1.9       3.0       9.3  Interest expense and amortization of debt discounts and   fees                                                       37.2      35.6     147.3     154.4     172.1     142.9     109.2  Equity in net income of nonconsolidated affiliates           2.5       2.3       8.7       8.0       9.8       8.7      10.7  Net income attributable to noncontrolling interests in   continuing operations                                      (22.9)    (21.4)    (83.1)    (79.1)    (70.5)    (69.7)    (59.7)  Amortization of debt-related items                           (1.0)     (1.0)     (4.0)     (8.7)    (13.8)    (14.3)    (12.7)  Distributions from nonconsolidated affiliates                (2.1)     (1.2)     (8.3)     (8.6)     (8.5)     (7.7)    (12.6)  Current portion of income tax expense                       28.2      33.0     128.0      85.0      31.0      14.8      13.3  Change in assets and liabilities                            36.5      (40.7)    (46.0)     7.4      30.1      82.7      48.8  Tax reform impact on noncontrolling interests(23)              —         —         —       4.6         —         —         —  Cash used in (provided by) operating activities of   discontinued operations                                     3.0       0.7       (0.8)     0.6       0.7       0.7       1.2  Transaction costs                                            0.6       1.0       1.0         —         —      12.3       9.3  SARS mark-to-market impact on noncontrolling interests   (see page 65)                                               (0.8)     (1.0)     (2.6)       —         —         —         —  Payroll taxes on SARs exercise                               0.2         —         —         —         —         —         —  Change in fair market value of equity securities             (0.9)     0.6       1.9         —         —         —         —  Other                                                        2.5       (0.9)     (3.5)     1.2       0.6       3.2       1.9    Adjusted EBITDA                                       $  242.9  $  223.3  $  901.0  $  823.1  $  793.6  $  682.5  $  577.6               Information regarding investing and financing categories of the statement of cash flows for the periods presented can be found on              Encompass Health’s website in the Earnings Releases for those periods.  Encompass Health                                Refer to pages 105-107 for end notes.                                       102
 Share information                                                                         Weighted Average for the Period                                                                       Q1                    Full Year                                                                 2019      2018      2018      2017      2016      Basic shares outstanding(24)                               98.4      97.8      97.9      93.7      89.1       Convertible senior subordinated notes(24)                  —         —         —         4.0       8.5      Restricted stock awards, dilutive stock options, restricted        stock units, and common stock warrants                  1.3       1.6        1.9       1.6       1.9      Diluted shares outstanding                                 99.7      99.4      99.8      99.3      99.5                                                                                 End of Period                                                                       Q1                    Full Year      (Millions)                                                 2019      2018      2018      2017      2016      Basic shares outstanding(24)                               98.3      97.9      97.6      97.6      88.3   Encompass Health                           Refer to pages 105-107 for end notes.                               103
 End Notes   Encompass Health                                                                                                                           104
 End Notes  (1)  Under this program, Joint Commission accredited organizations, like the Company’s IRFs, may seek certification for chronic diseases or conditions such as brain injury or      stroke rehabilitation by complying with Joint Commission standards, effectively using evidence-based clinical practice guidelines to manage and optimize patient care,      and using an organized approach to performance measurement and evaluation of clinical outcomes. Obtaining such certifications demonstrates the Company’s      commitment to excellence in providing disease-specific care. (2)  Data compares Encompass Health IRFs to IRFs comprising the Uniform Data System for Medical Rehabilitation (“UDSMR”), a division of UB Foundation Activities, Inc., a      data gathering and analysis organization for the rehabilitation industry which represents approximately 80% of the industry, including Encompass Health sites. Data is      adjusted by applying Encompass Health IRF case-mix to non-Encompass Health UDS IRFs. (3)  Source: https://data.medicare.gov/data/home-health-compare. Data on this page was published in January 2019 and reflects OASIS and HHCAHPS Survey data collected      from October 2017 through September 2018 and claims-based data collected from July 2017 through June 2018. (4)  The 126 for Encompass Health excludes the inpatient rehabilitation hospitals at Novant Health Rehabilitation Hospital, an affiliate of Encompass Health (opened      October 2018), Encompass Health Rehabilitation Hospital of Hilton Head (opened June 2018), Encompass Health Rehabilitation Hospital of Shelby County (opened April      2018), and Encompass Health Rehabilitation Hospital of Pearland (opened October 2017). The 126 does include HealthSouth Rehabilitation Hospital of Fort Worth, which      closed in May 2018. (5)  In 2017, the Company averaged 1,386 total Medicare and non-Medicare discharges per IRF in its then 123 consolidated IRFs that were open the full year. (6)  Case Mix Index (CMI) from the rate-setting file is adjusted for short-stay transfer cases. The Company’s unadjusted CMI for 2017 was 1.36 versus 1.34 for the industry as      measured by UDSMR. (7)  Source: FY 2019 CMS Final Rule Rate Setting File and the last publicly available Medicare cost reports (FYE 2016/2017) or in the case of new IRFs, the June 2018 CMS      Provider of Service File.           a.  All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2019 IRF Final Rule Rate Setting File found               at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Downloads/FY2019_datafiles_final.zip. The data presented was               developed entirely by CMS and is based on its definitions which are different in form and substance from the criteria Encompass Health uses for external               reporting purposes. Because CMS does not provide its detailed methodology, Encompass Health is not able to reconstruct the CMS projections or the               calculation.           b.  The CMS file contains data for each of the 1,126 inpatient rehabilitation facilities used to estimate the policy updates for the FY 2019 IRF-PPS Final Rule. Most               of the data represents historical information from the CMS fiscal year 2017 period and may or may not reflect the same Encompass Health hospitals in               operation today. The data presented was separated into three categories: Freestanding, Units, and Encompass Health. Encompass Health is a subset of               Freestanding and the Total. (8)  The Budget Control Act of 2011 included a reduction of up to 2% to Medicare payments for all providers that began on April 1, 2013 (as modified by H.R. 8). The      reduction was made from whatever level of payment would otherwise have been provided under Medicare law and regulation. (9)  Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a      non-GAAP measure. Management and some members of the investment community utilize Adjusted EBITDA as a financial measure and the leverage ratio as a liquidity      measure on an ongoing basis. These measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance      or liquidity. In evaluating Adjusted EBITDA, the reader should be aware that in the future the Company may incur expenses similar to the adjustments set forth. Further      explanation and disclosure relating to Adjusted EBITDA are included in the Company’s Form 8-K, dated May 13, 2019, to which this Investor Reference Book is attached      as Exhibit 99.1.      Encompass Health                                                                                                                                               105
 End Notes, con't.  (10)  The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”), which is a non-       GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better       comparability of ongoing operating performance to prior periods given that it excludes the impact of government, class action, and related settlements, professional       fees - accounting, tax, and legal, mark-to-market adjustments for stock appreciation rights, gains or losses related to hedging and equity instruments, loss on early       extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims), items related to       corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operating performance. It is reasonable to expect that one or       more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the       Company’s ongoing operating performance. Accordingly, they can complicate comparisons of the Company’s results of operations across periods and comparisons of the       Company’s results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally       accepted accounting principles in the United States as the items excluded from it are significant components in understanding and assessing financial performance.       Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be       comparable as presented to other similarly titled measures of other companies. Further explanation and disclosure relating to adjusted EPS are included in the       Company’s Form 8-K, dated May 13, 2019, to which this Investor Reference Book is attached as Exhibit 99.1.* (11)  Definition of adjusted free cash flow, which is a non-GAAP measure, is net cash provided by operating activities of continuing operations minus capital expenditures for       maintenance, dividends paid on preferred stock, distributions to noncontrolling interests, and certain other items deemed to be non-indicative of ongoing operating       performance, including government, class action, and related settlements and transaction costs. Common stock dividends are not included in the calculation of adjusted       free cash flow. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly       titled measures presented by other companies. Further explanation and disclosure relating to adjusted free cash flow are included in the Company’s Form 8-K, dated       May 13, 2019, to which this Investor Reference Book is attached as Exhibit 99.1. (12)  On July 21, 2016, the board of directors approved a $0.01 per share, or 4.3%, increase to the quarterly cash dividend on the Company’s common stock, bringing the       quarterly cash dividend to $0.24 per common share. On July 20, 2017, the board of directors approved a $0.01 per share, or 4.2%, increase to the quarterly cash       dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.25 per common share. On July 24, 2018, the board of directors approved a $0.02       per share, or 8.0%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.27 per common share. (13)  On Oct. 28, 2013, the Company announced its board of directors authorized the repurchase of up to $200 million of its common stock. On Feb. 14, 2014, the Company's       board approved an increase in this common stock repurchase authorization from $200 million to $250 million. As of June 30, 2018, the remaining repurchase       authorization was approximately $58 million. On July 24, 2018, the Company's board approved resetting the aggregate common stock repurchase authorization to $250       million. As of March 31, 2019, the remaining repurchase authorization was $237 million. (14)  On April 17, 2019, the Centers for Medicare and Medicaid Services released its notice of proposed rule making for fiscal year 2020 under the inpatient rehabilitation       facility prospective payment system (the “2020 Proposed IRF Rule”). Based on its analysis of the adjustments included in the proposed rule and other factors, including       the acuity of the Company’s patients over the three-month period prior to the release of the proposed rule, the Company currently estimates its Medicare payment rates       for its inpatient rehabilitation segment will be flat to down 25 basis points in fiscal year 2020 (effective October 1, 2019). Beginning in FY 2020 (October 1, 2019), CMS       proposes new case mix groupings, relative weights and length of stay values to reflect incorporation of CARE Tool assessment data. These changes will impact payment       under the IRF-PPS. (15)  The Bipartisan Budget Act (“BBA”) of 2018, signed into law on February 9, 2018, provides for a home health market basket update of 1.5% for CY 2020 and the       elimination of any productivity adjustment to the market basket for that year. It also provides for the extension of the rural add-on adjustment through 2022, albeit       declining in amount along the way. Additionally, it requires that a new case mix payment model be introduced in 2020 that would be based on a 30-day unit of service,       not include therapy thresholds as a component of the system, and be implemented in a budget neutral manner. On Oct. 31, 2018, CMS released its Notice of Final       Rulemaking for CY 2019, which finalizes significant changes to the HH-PPS that would be effective on or after January 1, 2020. These changes would include the       implementation of a new home health payment system, called the Patient-Driven Groupings Model (“PDGM”), as mandated by the BBA of 2018 discussed above. The       PDGM would use 30-day payment periods and rely more heavily on clinical characteristics and other patient information (such as principal diagnosis, functional level,       referral source, and timing), rather than the current therapy service-use thresholds, to set payments. It is too early to assess the potential effect of PDGM on our       business in 2020. The details of the rule are likely to change before the rule goes into effect. We cannot at this time assess potential changes to our patient mix       between now and 2020. Current projections do not account for actions we may take to adapt to the rule. To achieve budget neutrality, CMS assumed behavioral changes       will offset a 6.4% reduction in the base rate. Based on 2017 data, and assuming no change in the foregoing and other factors, which are subject to potentially significant       change, we estimate an approximate 3.8% (after a 1.3% net market basket update) incremental reduction in Medicare payments assuming the PDGM is implemented on a       budget neutral basis. We are unable to assess the likelihood or effect of these potential behavioral changes.      Encompass Health                                              *Reconciliations to GAAP provided on pages 95-102.                                               106
 End Notes, con't.  (16) The Company estimates the expected impact of each rule utilizing, among other things, the acuity of its patients over the 8-month (home health segment) to 3-month      (inpatient rehabilitation segment) period prior to each rule’s release and incorporates other adjustments included in each rule. These estimates are prior to the impact      of sequestration. (17) Quality reporting requirements and potential penalties were enabled for IRFs as part of the Healthcare Reform Bill (PPACA). The IMPACT Act of 2014 requires additional      quality and clinical data reporting for IRFs to be subject to the original 2% penalty. (18) Represents discharges from 129 consolidated hospitals in Q1 2019 and Q4 2018; 128 consolidated hospitals in Q3 2018; 127 consolidated hospitals in Q2 2018; and 126      consolidated hospitals in Q1 2018 (19) Full-time equivalents included in the table represent Encompass Health employees who participate in or support the operations of our hospitals and include an estimate      of full-time equivalents related to contract labor. (20) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-time equivalents from the      utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is determined by multiplying the number of licensed      beds by the Company’s occupancy percentage. (21) Represents home health admissions from 219 consolidatd locations in Q1 2019; 218 consolidated locations in Q4 2018; 214 consolidated locations in Q3 2018; 213      consolidated locations in Q2 2018; and 196 consolidated locations in Q1 2018 (22) Represents hospice admissions from 59 locations in Q1 2019; 58 locations in Q4 2018; 57 locations in Q3 2018 and Q2 2018; and 38 locations in Q1 2018 (23) The application of the lower income tax rate that resulted from the Tax Cuts and Jobs Act to the Company’s net deferred tax assets resulted in a net $13.6 million      decrease in tax expense in Q4 2017. Application of the new tax rate to the Company’s joint venture entities’ deferred tax liabilities resulted in a net reduction in tax      expense in Q4 2017. The Company’s joint venture partners’ share of this net tax benefit was $4.6 million, which resulted in an increase in noncontrolling interest      expense in Q4 2017. (24) In November 2013, the Company closed separate, privately negotiated exchanges in which it issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043      in exchange for 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. The Company recorded ~$249 million as debt and ~$71 million as equity. In      May 2017, the Company provided notice of its intent to redeem all $320 million of outstanding convertible notes. In lieu of receiving the redemption price, the holders      had the right to convert their notes into shares of the Company’s common stock at a conversion rate of 27.2221 shares per $1,000 principal amount of Notes, which rate      was increased by a make-whole premium. In the aggregate, holders of $319.4 million in principal elected to convert, which resulted in the Company issuing 8,895,483      shares of common stock (approximately 8.6 million shares were previously included in the diluted share count). The remaining $0.6 million of principal was redeemed      by cash payment.      Encompass Health                                                                                                                                               107