Investor Reference Book                                 Post Q4 2018 earnings release                                Last updated March 5, 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 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 March 5, 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-46      Growth  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47-58      Alternative payment models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59-63      Capital structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64-69      Information technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70-73      Operational metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74-80      Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81-93      Segment operating results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94-98      Reconciliations to GAAP and share information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99-111      End notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112-116   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 leading provider of inpatient rehabilitation                                        and home-based care                                                                                          Market overlap                                                                                   81 of EHC’s IRFs have an                                                                                  EHC home health location                                                                                   within the service area.*                                                                                Portfolio as of Dec. 31, 2018                                                                            Inpatient rehabilitation hospitals (“IRFs”)                                                                            Home health locations                                                                            Hospice locations                                                                            6 Future IRFs**                                                                         36 States and Puerto Rico  ~40,400 employees    Inpatient rehabilitation - 12/31/18                                      Home health and hospice - 12/31/18      130  IRFs (45 are joint ventures)                                         220  Home health locations       32  States and Puerto Rico               Largest owner and                58  Hospice locations  ~30,100  Employees                             operator of IRFs                30  States      22%  of licensed beds†                                                ~10,300  Employees      30%  of Medicare patients served†      4th Largest provider of              Key statistics - full-year 2018        Key statistics - full-year 2018     Medicare-certified skilled      137,396  Home health admissions                                              home health services  179,846  Inpatient discharges                                               7,474  Hospice admissions    ~$3.3  Billion in revenue                                                 ~$931  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 220 home health locations are nonconsolidated. 5                                            These locations are accounted for using the equity method of accounting.
 Company overview              inpatient rehabilitation      Inpatient rehabilitation         114 of the Company’s IRFs hold one or more disease-specific                                      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 (“ADLs”) • Speech-language therapists: address speech/voice functions, swallowing, memory/cognition, and   language/communication • 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 112-116 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 (“ADLs”)  • 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*           2018     2017          Demographics of all Medicare home health users**: RIC 01    Stroke                                 18.0%     18.0%      100 RIC 02/03 Brain dysfunction                      10.3%     10.1%       90 RIC 04/05 Spinal cord dysfunction                 3.8%      4.0%       80                                                                       e 70 RIC 06    Neurological conditions                21.0%     21.6%     g                                                                      a                                                                      t 60 RIC 07    Fracture of lower extremity             7.7%      7.9%     n                                                                      e                                                                       c 50 RIC 08    Replacement of lower extremity joint    3.9%      4.1%     r                                             85.9%                                                                      e  RIC 09    Other orthopedic                        9.0%      9.3%     P 40 RIC 10/11 Amputation                              2.6%      2.6%       30                                                                                            36.4%       32.9% RIC 14    Cardiac                                 4.5%      4.3%       20      24.5% RIC 17/18 Major multiple trauma                   5.3%      5.3%       10 RIC 20    Other disabling impairments            11.1%     10.0%              Age 85+       Lives     Has 2 or    Has 3 or                                                                                              alone     more ADL  more chronic   —       All other RICs                          2.8%      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.                                                   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.                             * Rehabilitation Impairment Categories (RICs) represent how the Company admitted the patient; BPCI (pages 61-62)    Encompass Health             uses Diagnostic-Related Groups (DRGs) which represent how the acute care hospital discharged the patient. 8                              ** Source: Avalere Health and Alliance for Home Health Quality and Innovation Home Health Chart Book 2018
 High-quality care                  IRF quality                                     Home health quality        Discharge to community                                                                     3.8                79.4%    79.9%     Percent of cases       78.7%                                     discharged to                                  Quality of care                     76.7%   75.7%    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;                                    Higher is better.                             51% are 4 Stars or higher      2016    2017     2018      Discharge to skilled nursing                                       Percent of                                  Patient satisfaction    13.1%    12.7%                                                   3.6                     12.3%             patients             3.5                      Star ratings(3)       10.1%                        discharged to a                9.3%      9.1%                                                 96% of our home health agencies                                    skilled nursing                                                                                    are 3 Stars or higher;                                       facility.                                     Lower is better.                              62% are 4 Stars or higher     2016     2017      2018        Discharge to acute hospital                                200 bps better                                       Percent of            17.2%                       30-Day                                        patients       10.7%     10.7%                                                             Readmission rate*   10.4%     10.4%        10.4%    discharged to an                      10.2%                                      acute care                    15.2%           Percent of patients                                       hospital.                               readmitted to an acute care                                    Lower is better.                             hospital. Lower is better.      2016     2017     2018             UDSMR(2)                  Encompass Health        National average      Encompass Health  Encompass Health                              Refer to pages 112-116 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 112-116 for end notes.
 Low cost leader          home health                                                                               Average revenue per                                                                              episode is 5.7%                                                     Average                              Average     Average    revenue                  higher than the peer                    2017      revenue      visits    per visit    Cost        average primarily                                     †                  Episodes   per episode per episode (all payors) per visit   due to higher acuity   Encompass                                                                  patient mix.     Health       211,743     $2,998       17.9       $161        $75                                                                              Cost per visit is 7.4%                                                                              lower due to market                                                                              density and operational                                                                              efficiency:                                                                                 Public peer                                                                  Caregiver    average       283,366     $2,835      17.4*      $148*        $81*            optimization                                                                               Optimization of HCHB                                                                               Employee culture of                                                                                 excellence                                                                               ~75% of visits                                                                                   conducted by full- Comparison to                               5.7%        2.9%       8.8%       (7.4)%           time staff  peer average                                                                 Daily monitoring of                                                                                   productivity                   Public peer average represents 2017 data from publicly traded home health providers.                                 * Kindred did not report visit counts in 2017.        † Amounts do not reflect the impact of the new revenue recognition accounting standard discussed on page 37.    Encompass Health                                                                              11
 New-store/same-store growth                                                inpatient rehabilitation                       Reliant (857 beds)            25.0   Franklin, TN (40 beds)              Bryan, TX (49 beds)                                                  Broken Arrow, OK (22 beds)                  Shelby County, AL (34 beds)                                                                                                 Bluffton, SC (38 beds)            20.0      Hot Springs, AR (27 beds)                                                                                                Pearland, TX            15.0                                             Gulfport, MS (33 beds)              (40 beds)                                                           Westerville, OH (60 beds)                                         Winston-Salem,                                                                                                                               NC (68 beds)             10.0                                                              Jackson, TN                                                                                                                      Murrells Inlet,                                                                                (48 beds)                                                   Modesto, CA                                                         SC (29 beds)                                                     (50 beds)             5.0               0.0   Discharges      Q1Q1 20162016 Q2Q2 20162016 Q3Q3 20162016 Q4Q4 20162016 Q1Q1 20172017 Q2Q2 20172017 Q3Q3 20172017 Q4Q4 20172017 QQ11 22018018 QQ22 22018018 QQ33 22018018 QQ44 22018018   New store         14.2%     11.7%     10.7%      1.3%       1.2%      1.9%       2.4%      2.0%      1.9%       1.6%      1.0%       1.7%   Same store        2.8%       1.9%      1.9%      0.1%       1.6%      1.6%       1.4%      3.9%      4.8%       3.6%      2.0%       1.9%   Total by qtr.     17.0%     13.6%     12.6%      1.4%       2.8%      3.5%       3.8%      5.9%      6.7%       5.2%      3.0%       3.6%   Total by year                                    10.8%                                     4.0%                                      4.6%   Same-store   year*                                            1.7%                                      1.8%                                      2.8%   Same-store   year UDS**                                       (0.6)%                                   (0.5)%                                     * Includes consolidated inpatient rehabilitation hospitals classified as same store during each period   Encompass Health                                                                                                                             12                                                                  ** Data provided by UDSMR
 New-store/same-store growth                                                home health                              Acquired CareSouth             70.0   (44 home health locations in 7 states)                              in November 2015            60.0             50.0             40.0                                                                                       Acquired Camellia Healthcare                                                                                   (14 home health locations in 3 states)            30.0                                                                                                 in May 2018             20.0             10.0              0.0  Admissions        QQ11 2 2016016 QQ22  22016016 QQ33  22016016 QQ44  22016016 QQ11  22017017 QQ22  22017017 QQ33 22017017 QQ44 22017017 QQ11 22018018 QQ22 22018018 Q3Q3 20182018 Q4Q4 20182018  New store           43.5%     41.6%     35.4%      8.1%       5.7%      6.4%       6.7%      3.5%      2.5%       5.3%      5.4%       5.3%  Same store*         12.6%     11.1%     15.3%      14.0%     13.9%      13.3%      8.8%     10.1%      7.4%       5.1%      3.8%       5.4%  Total by quarter    56.1%     52.7%     50.7%      22.1%     19.6%      19.7%     15.5%     13.6%      9.9%      10.4%      9.2%      10.7%  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.  Encompass Health                      * Includes consolidated home health locations classified as same store during each period              13
 Payors (Q4 2018)        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              73.4%             85.0%               - 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                                   9.5%                                   10.2%                                                     9.6%                                   2.8%                                 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,  112 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 December 31, 2018  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                                                       1st Medicare IRF price                                                                Q2-11          We have posted                                        Q3-11                                                         increase since 2007                                                                Q4-11                                                                Q1-12                                                       CMS implemented new         a year-over-year                                       Q2-12                                                                Q3-12                                                      coverage criteria for IRF                                                                Q4-12                                                             admissions               increase in                                      Q1-13                                                                Q2-13                                                       Patient Protection and                                                                Q3-13                                                         Affordable Care Act      Adjusted EBITDA in                                        Q4-13                                                                Q1-14                                                          (PPACA) of 2010                                                                 Q2-14                                                           signed into law           39 of the last                                       Q3-14                                                                Q4-14                                                                Q1-15                                                         IRF price increase:                                                                 Q2-15                                                       less PPACA adjustment             40 quarters                                        Q3-15                                                                Q4-15                                                                Q1-16        despite numerous                                        Q2-16                                                                Q3-16                                                        Sequestration began                                                                Q4-16               challenges.                                      Q1-17                                                                Q2-17                                                                Q3-17                                                            Home Health                                                                 Q4-17                                                                Q1-18                                                         rebasing cuts began                                                                Q2-18                                                                Q3-18                                                                Q4-18                                                                        -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                                     Partnered 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      114 Encompass Health inpatient rehabilitation hospitals hold one or more disease-                          specific certifications, including 112 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)            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    case mix and patient classification frameworks 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
 Clinical collaboration - overlap markets*        Inpatient rehabilitation–home health clinical collaboration (all payors)                                                                                         34.9%                                                               31.7%                 Collaboration rate                                                            Collaboration rate    u As of Dec. 31, 2018, Encompass Health had 81      overlap markets.*    u The clinical collaboration rate with Encompass            4,939                    5,596      Health’s inpatient rehabilitation hospitals increased      by 320 basis points in Q4 2018 compared to Q4      2017.    u The clinical collaboration rate objective is 35% to      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                                                                10,660                  10,434      episode.        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.                                                                Q4 2017                  Q4 2018                                                                                    EHC home health                                                               Encompass Health                                                               IRF discharges to:                                                                                    Non-EHC 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 March 5, 2019)    Encompass Health                        26
 2018 Highlights                GROWTH                u  Opened or acquired 4 new IRFs (including 2 joint ventures)                u  Expanded existing IRFs by 26 beds                u  Acquired or opened 23 home health locations and 22 hospice locations                 OPERATIONAL INITIATIVES                u  Completed rebranding and name change (see page 40)                u  Enhanced our use of predictive data analytics                     Deployed rehabilitation-specific readmission model across all of our hospitals                     Began production of 90-day post-acute readmission model that applies to all patients and settings                u  Increased clinical collaboration between the Company’s IRFs and home health locations                      Increased the number of overlap markets to 81 (from 76 as of 12/31/17)                     Increased the clinical collaboration rate to 34.0% (a 450 bps increase over 2017)                u  Piloted post-acute solutions                     Actively using care management tools at our hospitals in Tyler, TX and Petersburg, VA                     Began utilizing care navigators to follow a patient throughout an episode of care                 CAPITAL STRUCTURE                u  Maintained flexible balance sheet                     Reduced leverage below 3.0x                u  Continued shareholder distributions                     Paid ~$101 million in cash dividends                     Raised quarterly cash dividend per common share for the fifth straight year (from $0.25 to $0.27)   Encompass Health                                                                                                27
 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                                                                              28
 Priorities for 2019          GROWTH          OPERATIONAL INITIATIVES         u Increase clinical collaboration - see pages 24 and 25         u Build stroke market share - see page 30         u Develop and implement post-acute solutions - see page 31         u Transition to IRF CARE Tool payment system - see page 32         u Prepare for implementation of home health:              Patient-Driven Groupings Model (“PDGM”) - see page 33             Review Choice Demonstration (“RCD”) - see page 34          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                                                                29
 Building stroke market share  Leveraging our:  • strategic sponsorship with the AHA/ASA  • clinical collaboration  • joint commission certifications  ~800,000    strokes                ~130,000     per year               deaths from stroke     in the U.S.                                112 EHC IRFs                                                hold stroke-specific                            ~31,000             certifications.                           strokes treated in                            EHC IRFs                                               Continue to increase market                 ~639,000  EHC’s 3-year stroke share by focusing on IRF-                  strokes  CAGR is ~6%.        eligible stroke patients going                                               to SNFs and non-EHC IRFs                                                Stroke cases account for                                               ~1/3 of EHC’s Medicare                                               Advantage volume.               Source: https://www.heart.org/-/media/data-import/downloadables/heart-disease-and-stroke-statistics-2018 Encompass Health                                                       30                        ---at-a-glance-ucm_498848.pdf
 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                               Design and implement post-acute care                                              clinical decision support tools      – piloting in Tyler, Texas                                             Design and implement quality reporting                                             tool for building preferred provider      Deployed ReAct in all of our hospitals  networks     Developed 90-day post-acute            Create a provider hub to automate      readmission prediction model            market analysis tools for quality      – piloting in Tyler, Texas and          reporting across episodes        Petersburg, Virginia                 Use Medalogix for home health care                                             plan optimization and to reduce      Began utilizing care navigators to follow emergency room visits and hospital      a patient throughout an episode of care readmissions   Encompass Health                                                                31
 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 change will require CMS to make substantial changes to the CMGs, relative  weights and average length of stay values for the IRF-PPS, likely impacting  Medicare revenue per discharge for certain cases.         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                                                       32
 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                                                                33
 Home health: Review Choice Demonstration (“RCD”)*   State            Start date     Company        Overview                                  locations                                              Following the pause of the Pre-Claim Review  Illinois      To be determined      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. The proposed RCD will give providers in the  Florida       To be determined     17       demonstration 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 revised demonstration will likely begin in 2019                                              (with at least 30 days’ notice from CMS) and have a •  Add administrative resources as           staggered implementation beginning with home health    staggered implementation occurs           providers operating in Illinois, then expanding to Ohio                                              and North Carolina, and later to Florida and Texas. CMS •  Apply learnings from our Illinois         has the option to expand to other states in the    locations that successfully navigated     Palmetto 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                                                                              34                             Source: https://www.gpo.gov/fdsys/pkg/FR-2018-05-31/pdf/2018-11492.pdf
 Guidance - as of March 5, 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                  * See page 37 for discussion of the Company’s adoption of a new revenue recognition accounting standard. Encompass Health                                                  35                               Refer to page 112-116 for end notes.
 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 and estimated 2.4%          increase for CY 2019 (see page 42)   increase for Q4 (see page 42)               u                                                Salary increase of approx. 3.0%; benefits      Transition to CARE Tool may negatively     increase of approx. 6.0% to 8.0%      impact Q4 pricing                                               u u Salary increase of approx. 3.0%; benefits     Inclusive of $50 million to $100 million of   increase of approx. 6.0% to 8.0%              home health and hospice acquisitions in                                                 2019 u Revenue reserve (formerly bad debt expense)   of 1.4% to 1.6% of net operating revenues*  u Administrative costs related to the Review u 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 is expected to result in a gross-up of assets and   corresponding liabilities of $330 million to $370 million and is not expected to have a material   impact on our income statement or statement of cash flows.   Encompass Health   * See page 37 for discussion of the Company’s adoption of a new revenue recognition accounting standard. 36
 Impact of the new revenue recognition accounting standard  u   During the first quarter of 2018, Encompass Health adopted a new accounting standard (ASC 606 - Revenue from Contracts with      Customers) which clarifies the standard for recognizing revenue.  u   The primary impact to the Company’s financial reporting was that amounts it previously presented as provision for doubtful accounts      became a component of net operating revenue (both segments impacted similarly).      •  This had the effect of reducing net operating revenues but was neutral to Adjusted EBITDA and adjusted EPS.  u   The Company retrospectively adopted the new standard during Q1 2018, which means previously reported quarterly and full-year results      for 2017 have been updated to reflect the requirements of the new standard.                                                        Impact of the New Revenue Standard - Historical Periods                                                         As Historically Reported                                 As Currently Reported Under New Standard                                      Q4-17      Q3-17      Q2-17      Q1-17     FY 2017    FY 2016      Q4-17      Q3-17      Q2-17      Q1-17     FY 2017    FY 2016 Net operating revenue (millions)   $ 1,019.7  $   995.6  $   981.3  $   974.8  $ 3,971.4  $ 3,707.2   $ 1,008.8  $   981.6  $   966.4  $   957.1  $ 3,913.9  $ 3,642.6 Provision for doubtful accounts   (millions)                             9.7       12.6       13.7       16.4       52.4       61.2           —          —          —          —          —          — Other operating expenses   (millions)                           139.5      137.6      130.5      129.1      536.7      492.1       138.3      136.2      129.3      127.8      531.6      488.7 Inpatient rehabilitation revenue/   discharge                           17,871     17,896     17,823     18,131     17,929     17,577      17,693     17,654     17,557     17,812     17,679     17,265 IRF Segment - Prov. for doubtful accounts as a % of revenue               1.0%       1.4%       1.6%       1.8%       1.5%       1.9%     N/A        N/A        N/A        N/A        N/A        N/A Home health revenue/episode            2,989      3,022      2,989      2,991      2,998      3,031       2,976      3,008      2,975      2,978      2,984      3,017 Adjusted EBITDA (millions)             208.2      204.6      209.5      200.8      823.1      793.6                              No Change Adjusted EPS                            0.70       0.66       0.71       0.70       2.76       2.67                              No Change                                                         Impact of the New Revenue Standard - Current Period                                                   Pro Forma Under Previous Accounting Standard               As Currently Reported Under New Standard                                                Q4-18      Q3-18      Q2-18      Q1-18     YTD 2018      Q4-18      Q3-18      Q2-18      Q1-18     YTD 2018           Net operating revenue (millions)   $ 1,109.4  $ 1,079.9  $ 1,079.5  $ 1,056.7  $  4,325.5   $ 1,096.0  $ 1,067.6  $ 1,067.7  $ 1,046.0  $  4,277.3           Provision for doubtful accounts             (millions)                            13.4      12.3       11.8       10.7         48.2           —          —          —          —           —           Inpatient rehabilitation revenue/             discharge                          18,345     18,276     18,196     18,297       18,279      18,084     18,051     17,987     18,114      18,059           IRF Segment - Prov. for doubtful           accounts as a % of revenue               1.5%       1.3%       1.2%       1.1%        1.3%  N/A        N/A        N/A           N/A        N/A           Home health revenue/episode           2,978      3,006      2,982      2,937        2,977       2,972      2,995      2,968      2,934       2,968           Adjusted EBITDA (millions)                               No Change                                                No Change           Adjusted EPS                                             No Change                                                No Change    Encompass Health                                                                                                                                                37
 Adjusted free cash flow(11) assumptions            Certain cash flow items     2018       2019                (millions)           Actuals  Assumptions       Cash interest payments (net of      amortization of debt discounts $143.3   $145 to $155      u  Revised from an initial 2019      and fees)                                                    estimate of $140 to $150 million                                                                   due to the favorable impact of                                                                   bonus depreciation and other      Cash payments for income taxes,                                     $114.8   $110 to $130         changes in deferred tax assets      net of refunds                                                                u  Working capital increase in 2019                                                                   due primarily to revenue growth      Working capital and other      $(48.1)   $30 to $50                                                                u  Maintenance capital expenditures                                                                   in 2019 are reflective of our                                                                   expanding hospital portfolio.      Maintenance CAPEX              $152.9   $160 to $170                                                                u  Increased from an initial 2019                                                                   range of $400 to $470 million due                                                                   to revision in estimate of cash      Adjusted free cash flow        $538.1   $420 to $500         taxes discussed above   Encompass Health         Reconciliations to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes. 38
 Uses of free cash flow                                                             2018          2019                                                           Actuals     Assumptions                        IRF bed expansions                  $22.3       $40 to $50                        New IRFs                          - De novos                         76.4       85 to 115            Growth in     - Acquisitions                      —       opportunistic               core       - Replacement IRFs and other       24.5       90 to 110             business   Home health and hospice acquisitions                        (includes Camellia in 2018)*        143.9       50 to 100                                                                      $265 to $375,                                                                      excluding IRF                                                            $267.1     acquisitions                Debt            reduction   Debt redemptions (borrowings), net  $63.3     opportunistic                          Quarterly cash dividend currently set at                         $0.27 per common share(12)                         Cash dividends on common stock(12)  100.8         ~$108           Shareholder  Purchase of Home Health Holdings                              $13.2 million           distributions rollover shares and exercise of SARs                        SARs exercised                        (see page 69)                        65.1          TBD        in Q1 2019                                                                                      (see page 69)                        Common stock repurchases              —       opportunistic                           ~$250 million authorization as of $229.2       $TBD                                 Dec. 31, 2018(13)  Encompass Health  * Net of assumed accounts payable and accrued expenses, the cash paid for the acquisition of Camellia was $131.4 million. 39                                  See the debt schedule on page 67. Refer to page 112-116 for end notes.
 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 40
 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 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                                                                              41
 Business outlook 2019 to 2021: revenue assumptions               Volume                          Inpatient Rehabilitation*                            Home Health*      (includes new stores)                3+% annual discharge growth                   10+% annual admission growth                                           Approx. 73% 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     Estimate†       Estimate†      Final Rule    Q120-Q420         Estimate†        Market basket update              2.9%            3.0%           3.0%            3.0%           1.5%            3.0%      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%)          (0.6%)         (0.6%)          (0.8%)            -            (0.6%)      Net market basket update           1.35%            2.4%           2.4%            2.2%           1.3%            2.3%         Change in wage index            (0.1%)            -               -               -              -               -  Change in CMG relative weights and     average length of stay values       (0.1%)            -               -               -              -               -      Change in outlier threshold        (0.0%)            -               -               -              -               -             Impact from          case mix re-weighting              -              -               -            (0.7%)            -               -          Estimated impact         to Encompass Health(16)           1.2%                                           1.5%          (3.8%)**         Medicare Advantage                     Approx. 20% of revenue                         Approx. 13% of revenue     and managed care pricing         Expected increases               2-4%           2-4%            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.    42                                                       Refer to pages 112-116 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                                                                                                43
 IRF-PPS fiscal year 2019 final rule: key provisions                        Update to payment rates                                                                                  Company observations The final rule will: • Implement a net 1.35% market basket increase       – 2.9% market basket increase                                           Pricing:        – (75 bps) healthcare reform reduction                                  •  Net pricing impact to the       – (80 bps) healthcare reform productivity reduction;                       Company expected to be an • Update case mix group relative weights and average length of stay values; • Increase the outlier fixed loss threshold; and                                 increase of ~1.2% for FY 2019 • Revise the wage index values.                                                  (see page 42)           Quality reporting and IRF coverage requirements                      •  Because of its efficient cost • CMS will remove National Healthcare Safety Network (NHSN) Facility-wide        structure, the Company receives   Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA)    very few outlier payments   Bacteremia Outcome Measure (NQF #1716), beginning with the FY 2020 IRF         despite treating higher acuity   QRP; and remove Percent of Residents or Patients Who Were Assessed and                                                                                  patients (see page 93).    Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF   #0680), beginning with the FY 2021 IRF QRP.                                                               (14) • CMS will begin to publicly displaying data on four assessment-based         Expected FY 2020 changes         :   measures in CY 2020.                                                         • CMS will be proposing additional • CMS will make changes to certain IRF coverage requirements to increase         changes to the new CMGs,   flexibility and reduce burden.                                                 relative weights and average  Elimination of FIMTM functional assessment items from IRF-PPS(14)               length of stay values in the FY                                                                                  2020 IRF-PPS proposed notice of • Beginning Oct. 1, 2019, CMS will remove the FIMTM functional assessment         rulemaking.   items from the IRF-PAI.                                                      • The Company will continue • CMS will replace the FIMTM measures with data items located in the Quality   Indicators section of the IRF-PAI for payment purposes.                        providing input to CMS on the • This change will require CMS to make substantial changes to the CMGs,          development of the case-mix   relative weights and average length of stay values for the IRF-PPS.            methodology changes.                            Source: https://www.federalregister.gov/documents/2018/08/06/2018-16517/medicare-program-inpatient-   Encompass Health                      rehabilitation-facility-prospective-payment-system-for-federal-fiscal     44                                                   Refer to pages 112-116 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 42)                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 45                                              Refer to pages 112-116 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 112-116 for end notes.                  46
 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                                               47
 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   Encompass Health                                                                48
 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 49
 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                                                                                                            •  Bluffton, SC (38 beds)                               1,200                                                                              125                                                                                                                  120                               1,000                                                                                         •  Murrells Inlet, SC (29 beds)                                                                                                                  115       Acquisitions              800                                                                              110        •  Winston-Salem, NC (68 beds)                                                                                                                  105                                 600                                                                                         •  Bed expansions (26 beds)                                                                                                                  100                                 400                                                                              95             Bed                                                                                                                 2019 Projected bed                                                                                                                  90       expansions                200                                                                                             count increase                                                                                                                  85  Wholly  owned and joint ventures                                                                                           •  Lubbock, TX (40 beds)                                    0                                                                             80                                           2013      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            6,825     7,095      8,404     8,504*     8,851     8,966†    9,261‡ Total number of IRFs                      103       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                                                                                                                                                50
 Inpatient rehabilitation growth pipeline        Disciplined approach to new store growth                                                                               The Company’s value proposition         –   $7.7 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 2018 - page 267   Encompass Health                                     CA = confidentiality agreement                                          51
 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 December 31, 2018: Encompass Health   Lubbock, TX; Boise, ID; and Dayton, OH (current wholly owned 50-bed IRF that will become a joint venture with 52                    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 53                   ** 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(18) (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    Encompass Health                              Refer to pages 112-116 for end notes.                             54
 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                     55                                             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                                                                      56
 Home health growth pipeline                                                                              Number of home health agencies over time •   $18.1 billion Medicare home     health market is highly                                    13,000            The number of home health agencies      fragmented with over 12,200                                                   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                                                                          1996     1998    2000     2002    2004     2006    2008    2010     2012    2014     2016                                                                                         Interim                                                                             Cost-       payment                                                                             based       systems                    Prospective Payment System (PPS)                                                                                           (IPS)                                    Source: MedPAC, Medicare Payment Policy - March 2018, page 246; March 2017, page 231; March 2016, page 214;  Encompass Health                 March 2015, page 218; March 2014, page 221; March 2013, page 194; and March 2003, page 112; MedPAC - Healthcare                57                                   spending and the Medicare program, June 2006, page 131; Medicare Claims Data
 Hospice growth pipeline  • Medicare hospice market is approx. $17 billion. • 1.4 million Medicare beneficiaries received       Acquisition strategy for hospice  hospice services from approx. 4,400 providers in   • Build additional scale  2016.                                              • 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 2016, 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                  2016  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 2018, pages 323, 325, 330 and 333;  Encompass Health       https://www.kff.org/medicare/fact-sheet/10-faqs-medicares-role-in-end-of-life-care/ 58
 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 APM initiatives.    Encompass Health                                               59
 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 60                                     Next Generation ACO model since participants were announced in January 2018.
 Bundled payments    The bundled payments for Care Improvement            How the retrospective models work           (BPCI) initiative currently tests                                                          The BPCI “convener” is responsible for bringing              four types of bundles                        providers together to provide a continuum of services                   (i.e. “Models”):                        throughout an episode of care. The BPCI “awardee”                                                           is the entity that bears the financial risk and receives                     Model  1                              the shared savings from CMS.                                                          Each participating provider in the care sequence           All acute patients (all DRGs)                   continues to receive its traditional reimbursement                – Concluded Dec. 31, 2016 –                from Medicare.                                                          Models 2 & 3 have the most impact on post-acute providers. The sum of all payments made to each provider for                                                           selected DRGs is then retroactively reconciled to a                                                           target payment determined by CMS. Payment                    Model  2*                              reconciliations are performed quarterly, typically                                                           with a 9- to 12-month lag. Hospital plus post-acute period (selected DRGs)                                                          Payment reconciliations: If actual spending exceeds                                                           the target, the awardee is responsible for paying a                                                           portion of the difference to CMS. If actual spending is                    Model  3*                              less than the target, the awardee keeps a portion of         Post acute only (selected DRGs)                   the savings.                                                          The convener can choose to partner with other                                                           providers in shared savings agreements and allocate                                                           the savings across the providers who participated in                    Model  4*                              providing the continuum of care.            Hospital plus readmissions                    Shared savings agreements must be reviewed and                                                           approved by the Center for Medicare and Medicaid                  (selected DRGs)                          Innovation.      * BPCI Models 2, 3, and 4 ended on September 30, 2018 and was replaced by the BPCI Advanced model which began on October 1, 2018 and runs through       December 31, 2023. BPCI Advanced is a new voluntary episode payment model that will test a new iteration of bundled payments for 29 inpatient clinical       episodes and 3 outpatient clinical episodes. For more information regarding BPCI Advanced, see https://innovation.cms.gov/initiatives/bpci-advanced.   Encompass Health             Notes: Models 1, 2, and 3 are retrospective models; model 4 is a prospective model. 61                                           The convener and awardee can be, but may not be, the same entity.
 The Company’s historical participation in BPCI Model 3* (2017)                                                              Inpatient rehabilitation                                                                                       Participating          Bundle length           % of the Company’s   BPCI bundle                                                                                IRFs                (in days)             total discharges   Stroke                                                                                       3                      60                       0.11%   Simple pneumonia                                                                             1                      60                       0.02%   Sepsis                                                                                       1                      60                       0.01%   Double-lower extremity joint replacement                                                     2                      60                       0.01%   Upper extremity joint replacement                                                            1                      60                      <0.01%      Total                                                                                     8                                              0.16%                                                                       Home health                                                                                           Bundled            Bundle length           % of the Company’s   BPCI bundle                                                                         arrangements               (in days)              total episodes   Major joint replacement of the lower extremity                                              19                      90                       0.77%   Spinal fusion (non-cervical)                                                                 7                   60/90                       0.06%   Sepsis                                                                                       8                      90                       0.06%   Revision of the hip or knee                                                                 10                      90                       0.06%   Simple pneumonia and respiratory infections                                                  6                      90                       0.05%   Major joint replacement of the upper extremity                                               8                   60/90                       0.05%   Urinary tract infection                                                                      2                      90                       0.03%   Other respiratory                                                                           15                      90                       0.03%   Chronic obstructive pulmonary disease                                                       10                      90                       0.02%   Congestive heart failure                                                                     8                      90                       0.02%   All other episode types                                                                     35                 30/60/90                      0.13%      Total                                                                                  128**                                             1.28%    * BPCI Model 3 ended on September 30, 2018 and was replaced by the BPCI Advanced model which began on October 1, 2018 and runs through December 31, 2023.     BPCI Advanced is a new voluntary episode payment model that will test a new iteration of bundled payments for 29 inpatient clinical episodes and 3 outpatient     clinical episodes. EHC home health currently serves as a convener for two episode initiators.      For more information regarding BPCI Advanced, see https://innovation.cms.gov/initiatives/bpci-advanced.  Encompass Health                             ** Represents a total of 72 locations participating in 128 bundled payment arrangements                            62
 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           4                                     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           44                       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; EHC expects impact of ($0.3) million, or a (0.27%) payment adjustment to                                                           Medicare revenue in the nine VBP states, in 2018.                                                           ‡ EHC expects a neutral to slightly positive payment adjustment to Medicare                                                           revenue in the nine VBP states in 2019.                              Source:  https://innovation.cms.gov/initiatives/home-health-value-based-purchasing-model Encompass Health    * Per the CY 2019 HH Final Rule at: https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-24145.pdf 63                                  ** Home Health Care Consumer Assessment of Healthcare Providers and Systems
 Capital structure                 Encompass Health is positioned with a                cost-efficient, flexible capital structure.   Encompass Health                                               64
 Debt maturity profile - face value     As of Dec. 31, 2018*                                                                                                            Callable beginning                                                                                                           September 2020    ($ in millions)                                                Callable beginning                                                                    November 2017                          $633                        Available                                                                                               $1,200                                                                 Callable beginning            Senior                                                                    March 2018                 Notes                                                                                               5.75%                  $30 Drawn +             Revolver                  $37 reserved            capacity                     for LC’s                                                              $280           $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 ~$264 million of capital lease obligations or ~$104 million of other notes payable. Encompass Health                                                                                                             65                                                       See the debt schedule on page 67.
 Financial leverage and liquidity                          Total debt                                                                                  Liquidity                    Leverage ratio(19)      (Billions)                        4.6x*                                                        Dec. 31, 2018    Dec. 31, 2017                                                               Cash available         $         69.2   $         54.4                                                              Revolver               $        700.0   $       700.0                                                               Less:                                                                - Draws                       (30.0)           (95.0)                        3.17                                    - Letters of credit           (37.4)           (35.4)                                3.02               2.8x      2.8x                                                    Available              $        632.6   $       569.6                                        2.58                                                2.51          Total liquidity        $        701.8   $       624.0                2.11                                                                                Credit ratings          1.52                                                                            S&P           Moody’s                                                              Corporate rating          BB-             Ba3                                                                 Outlook               Stable          Stable                                                              Revolver rating           BB+             Baa3                                                              Senior notes rating       B+               B1        2013    2014    2015    2016    2017    2018    * 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.                                              Reconciliations to GAAP provided on pages 99-110.   Encompass Health                 Refer to pages 112-116 for end notes. See also the debt schedule on page 67.   66   (1)
 Debt schedule                                                                                                      Change in                                                                December 31,      December 31,         Debt vs.   ($millions)                                                      2018              2017            YE 2017   Advances under $700 million revolving credit facility,      September 2022 - LIBOR +150bps                          $          30.0  $           95.0  $           (65.0)   Term loan facility, September 2022 - LIBOR +150bps                    280.1             294.7              (14.6)   Bonds Payable:     5.125% Senior Notes due 2023                                        296.6             295.9               0.7     5.75% Senior Notes due 2024                                       1,194.7           1,193.9               0.8     5.75% Senior Notes due 2025                                         345.0             344.4               0.6   Other notes payable                                                   104.2              82.3              21.9   Capital lease obligations                                             263.8             271.5               (7.7)     Long-term debt                                            $       2,514.4  $       2,577.7   $           (63.3)   Debt to Adjusted EBITDA                                                2.8x              3.1x   Encompass Health                        Reconciliations to GAAP provided on pages 99-110.                       67
 IRF real estate portfolio   130 inpatient rehabilitation hospitals: 8,966 licensed beds   4,694 licensed beds                                                                            Own ~70% of IRF real estate              in CON states                                                                                                                       As of Dec. 31, 2018                                                                                                                  61 own building and land                                                                                                                  29 own building only                                                                                                                 40 lease building and land                                                                                                          4,272 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                                                                                                                                                                           68
 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 based on the fair value of the common stock      of Home Health Holdings to certain members of that management team. Half of the SARs vested     Home Health      on Jan. 1, 2019, and the other half vest on Jan. 1, 2020. Once vested, they are exercisable until   Holdings      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%      may be added to the principal amount of the note or via the creation of new notes. 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 Dec. 31, 2018, the value of the Rollover Shares was ~$223 million and the value of the SARs was ~$87 million.                       In February 2018, each management investor exercised their rights to sell 1/3 of his/her Rollover Shares to EHC,                       representing ~5.6% of the outstanding common shares of Holdings. EHC settled the acquisition of those shares upon Activity              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                                                                                                             69
 Information technology           Encompass Health utilizes information technology to         improve patient care and generate operating efficiencies.   Encompass Health                                               70
 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                                                                                                                             71
 IRF Proprietary management system: Beacon             Operations management tool                    Supply chain procurement    Encompass Health                                                                72
 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                                                                                                73
 Operational metrics   Encompass Health                        74
 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,                                   51.1    50.8     by the number of occupied beds during each   48.5    48.6    50.2    50.4                                                    period. The number of occupied beds is                                                    determined by multiplying the number of licensed                                                    beds by the Company’s occupancy percentage.                                                   20.9    21.1    21.3    21.0    21.0    21.1                 Salaries and benefits                          IRF-related expenses     2013        2014        2015        2016        2017        2018        2013        2014        2015        2016        2017       2018    3.44    3.40    3.41    3.44    3.47    3.43                      EPOB   Encompass Health                                                                              75
 Pre-payment claims denials - inpatient rehabilitation segment  Background                                                              Encompass Health reserves pre-payment claim denials as a reduction of • For several years, under programs designated as “widespread probes,”  net operating revenues upon notice from a MAC a claim is under review.   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   administrative law judge (“ALJ”), Encompass Health historically has                       Collections of  Revenue                                                                         Period  New Denials   Previously   Reserve for Reserve for   experienced an approximate 70% success rate.                                                                            Prior                                                                                             Denied Claims New Denials    Denials   –  MACs identify medical documentation issues as a leading basis for                              (In Millions)      denials.                                                                        Q4 2018     $4.6         $(3.2)        $1.4         $—   –  Encompass Health’s investment in clinical information systems and its      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    Q4 2017      0.7         (7.8)         0.2          —   address the backlog of appeals, but their effect is uncertain.       Q3 2017      7.4         (6.2)         2.2          — • In 2016, a federal court ordered HHS to eliminate the backlog by the end Q2 2017 16.5         (7.7)         4.9          —   of CY 2020. HHS continues to object that it cannot clear the backlog in Q1 2017  19.0         (5.9)         5.7          —   the timeframe established by the court. Although HHS remains bound by Q4 2016    17.8         (4.4)         5.4          0.5   the order, the courts are considering how HHS will comply.                                                                        Q3 2016     15.7         (8.5)         4.6          — • All Medicare providers continue to experience delays resulting in a  Q2 2016     18.7         (4.9)         4.6          —   growing backlog.                                                     Q1 2016     22.7         (8.4)         6.0          —   –  Currently, ALJs are hearing Encompass Health appeals from claims  Q4 2015     22.5         (4.1)         5.6         (1.3)      denied up to eight years ago.                                                                                           Impact to balance sheet • CMS has implemented the Targeted Probe and Educate (“TPE”) initiative.   For more information regarding TPE, see https://www.cms.gov/Research-                              Dec. 31,  Dec. 31,  Dec. 31,   Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-                                       2018       2017      2016   Compliance-Programs/Medical-Review/Targeted-Probe-and-                                                      (In Millions)   EducateTPE.html                                                                        Pre-payment claims denials   $   158.1 $    164.0 $  159.7 • Effective February 2018, Palmetto GBA assumed responsibilities for   Cahaba’s MAC jurisdiction. See announcement from CMS at https://     Recorded reserves                 (47.4)    (49.2)    (47.9)   www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-   Net accounts receivable from   Contractors/Downloads/JurisdictionJAwardFactSheet-09082017.pdf         pre-payment claims denials $   110.7 $   114.8 $   111.8   Encompass Health                                                                                                             76
 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 provider can win an appeal Zone Program Integrity Contractors (“ZPICs”)                                                                              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)          Duplicative audits 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  Overlapping audits by multiple auditors will continue to                        Impact to income statement          clog the appeals pipeline.                                                  Post-payment audits have not had a material                                                                                       impact on our 2016-2018 income statements.     Encompass Health                                                                                                             77
 Inpatient rehabilitation operational and labor metrics                                 Q4          Q3         Q2          Q1          Q4          Q3         Q2          Q1              Full year                              2018        2018       2018        2018        2017        2017       2017        2017         2018         2017                                                                                (In Millions) Net patient revenue-  inpatient                 $   822.8  $    798.4  $   809.6  $    817.1   $   776.9  $    758.2  $   751.5  $    752.7   $  3,247.9   $  3,039.3 Net patient revenue-  outpatient and other  revenues                       22.9        27.2       25.0        23.2        25.5        25.3       26.1        25.1         98.3        102.0 Net operating  revenues*                 $   845.7  $   xxx-xxx825.6 $ 834.6 $  840.3   $   802.4  $    783.5  $   777.6  $    777.8   $  3,346.2   $  3,141.3                                                                             (Actual Amounts)             (20) Discharges                    45,498      44,230     45,010      45,108      43,910      42,948     42,805     42,259       179,846      171,922 Net patient revenue   per discharge*           $  18,084  $   18,051  $  17,987  $   18,114   $  17,693  $   17,654  $  17,556  $  17,812    $   18,059   $   17,678 Outpatient visits            111,399     119,006    131,041    127,308      131,787    138,689     153,415    152,454       488,754      576,345 Average length of stay          12.5        12.7       12.5        12.7        12.6        12.8       12.7        12.9         12.6         12.7 Occupancy %                     68.8%       68.9%      70.1%       71.9%       67.7%       68.2%      69.3%       71.0%        69.3%        67.8% # of licensed beds             8,966       8,888      8,848       8,831       8,851       8,748      8,641       8,528        8,966        8,851 Occupied beds                  6,169       6,124      6,202       6,349       5,992       5,966      5,988       6,055        6,213        6,001 Full-time equivalents         (21)  (FTEs)                       21,199      21,119     21,010      20,978      20,739      20,740     20,474     20,254        21,076       20,552 Contract labor                   266         237        248         285         255        235         251        260           259          250 Total FTE and  contract labor               21,465      21,356     21,258      21,263      20,994      20,975     20,725     20,514        21,335       20,802       (22) EPOB                            3.48        3.49       3.43        3.35        3.50        3.52       3.46        3.39         3.43         3.47    Encompass Health                * See page 37 for discussion of the Company’s adoption of a new revenue recognition accounting standard.     78                                                               Refer to pages 112-116 for end notes.
 Home health and hospice operational metrics                                  Q4          Q3         Q2          Q1          Q4         Q3          Q2         Q1              Full year                               2018        2018       2018        2018        2017       2017        2017       2017         2018         2017                                                                                (In Millions) Net home health  revenue                    $    215.3 $    209.2  $    204.8 $    185.3  $    186.3  $    180.3 $    171.9  $    163.9  $     814.6  $    702.4 Net hospice revenue               35.0       32.8        28.3       20.4        20.1        17.8       16.9        15.4        116.5        70.2 Net operating  revenues*                  $    250.3 $    242.0  $    233.1 $    205.7  $    206.4  $    198.1 $    188.8  $    179.3  $     931.1  $    772.6 Home health:                                                                (Actual Amounts)              (23) Admissions                      35,151     34,364      34,026     33,855      31,766      31,471     30,823      30,810      137,396     124,870 Recertifications                29,530     28,733      28,089     25,229      25,479      24,396     22,568      20,546      111,581      92,989 Episodes                        64,037     61,765      61,238     56,658      56,625      53,757     52,101      49,260      243,698     211,743 Average revenue per   episode*                  $    2,972 $    2,995  $    2,968 $    2,934  $    2,976  $    3,008 $    2,975  $    2,978  $     2,968  $    2,984 Episodic visits per   episode                         17.4       17.6        17.5       17.9        17.3        17.7       18.1        18.7         17.6        17.9 Total visits                 1,285,150  1,259,055   1,240,490  1,174,950   1,124,268   1,101,109  1,095,225   1,070,356    4,959,645   4,390,958 Cost per visit              $       76 $       77  $       76 $       75  $       77  $       76 $       73  $       75  $        76  $       75 Hospice:              (24) Admissions                       2,030      2,054       1,797      1,593       1,355       1,273      1,114       1,128        7,474       4,870 Patient days                  231,515     223,834    192,404     143,231     134,113     123,491    113,028     108,717      790,984     479,350 Revenue per day*            $      151 $      147  $     148  $      142  $      150  $      145 $      149  $      141  $       147  $      146    Encompass Health                * See page 37 for discussion of the Company’s adoption of a new revenue recognition accounting standard.     79                                                               Refer to pages 112-116 for end notes.
 Payment sources (percent of revenues)                                 Inpatient         Home Health                             Rehabilitation        and Hospice                   Consolidated                                Segment              Segment                                     Q4                  Q4                  Q4                 Full Year                               2018      2017      2018      2017      2018      2017       2018      2017     Medicare                   73.4%      74.0%     85.0%     86.9%     76.0%     76.9%     75.9%       76.0%     Medicare Advantage           9.5%      8.2%      9.6%      8.9%      9.5%      8.3%       9.2%       8.6%     Managed care               10.2%      10.3%      3.3%      3.7%      8.7%      8.9%       8.8%       9.3%     Medicaid                     2.8%      2.9%      1.7%      0.5%      2.6%      2.4%       2.6%       2.5%     Other third-party payors     1.5%      1.7%       —%        —%       1.1%      1.3%       1.1%       1.3%     Workers’ compensation        0.7%      0.8%      0.3%       —%       0.6%      0.6%       0.7%       0.7%     Patients                     0.5%      0.7%       —%        —%       0.4%      0.5%       0.5%       0.5%     Other income                 1.4%      1.4%      0.1%       —%       1.1%      1.1%       1.2%       1.1%       Total                   100.0%     100.0%    100.0%    100.0%    100.0%    100.0%    100.0%      100.0%   Encompass Health                                                                                                80
 Industry structure   Encompass Health                                                                                                                             81
 Overall healthcare spending     National healthcare spending: $3,337.2 billion in 2016       (billions)                      $157.4        Investment                       $43.8        Government administration                       $82.2        Government public health                       $441.7        Retail of medical products                        $92.4        Home health care                      $173.5        Other health, residential and personal care                        $881.2        Professional services                        $162.7        Nursing care facilities and continuing care retirement communities                                      Hospital care                      $1,082.5      Includes inpatient rehabilitation, long-term care hospitals            Personal healthcare: $2,834.0 Personal      Health  consumption spending*: $2,960.0   Encompass Health    Source: Centers for Medicare & Medicaid Services, National Health Expenditure Data (Historical), Table 2 - 2016 82                                    * Excludes Net Cost of Private Health Insurance of $219.8 billion.
 Medicare 2016 spending = $678.7 billion                           $7.7B (1%)                 Inpatient rehabilitation hospitals                 (Included in inpatient hospitals)                                                              $  29.1B    Skilled nursing               Medicare Part A                                                              $141.3B     Inpatient hospital                      4%                                         21%                                                              $69.9B      Physician payments                                                                                                        Medicare Part B          15%                                                 $49.6B      Outpatient hospital                                                               $18.1B      Home health                                                              $16.8B      Hospice                     Medicare Parts A&B                                                   10%        $65.8B      Other services                                                    7%         $188.6B     Medicare managed              Medicare Part C                                                                             care          28%                                                3%                                             2%                                    10%                       $99.5B      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 2016, Medicare spent $7.7 billion and $5.1 billion, respectively for inpatient rehabilitation and long-term acute care  hospital services.                               Source: Centers for Medicare & Medicaid Services, Medicare Trustees’ Report July 2017 – page 10; and  Encompass Health                  MedPAC, Medicare Payment Policy, March 2018 - pages 205, 241, 267, 297, and 323            83
 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                                                                                      84
 Post-acute 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)              $5.1                 $7.7                 $29.1                 $18.1*                     # of Discharges                  ~126,000              ~391,000             ~2,300,000           ~3,400,000                      Length of stay                  26.8 days             12.7 days            38.4 days                N/A                      # of Providers                    ~410                 ~1,200               ~15,000               ~12,200                                                    For-profit (79%)      For-profit (32%)      For-profit (70%)                 Facility ownership mix**          Non-profit (17%)      Non-profit (57%)     Non-profit (24%)      For-profit (88%)                                                      Gov’t (4%)           Gov’t (11%)           Gov’t (6%)         Non-profit (12%)                                                                        Free-standing (23%)   Free-standing (96%)  Free-standing (85%)             Free-standing vs. hospital based            N/A           Hospital based (77%)  Hospital based (4%)  Hospital based (15%)                                                      Urban (95%)           Urban (86%)          Urban (72%)           Urban (83%)                    Rural vs. urban**                 Rural (5%)           Rural (14%)           Rural (28%)          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 2018 - pages 205, 210, 219, 226, 241, 258, 267, 277, 278, 297,   85                                     305, and 306; MedPAC, Health Care Spending and the Medicare Program, June 2017 - pages 121
 Medicare spending on post-acute services         6                                                                                                                      Home health spending*                    3.6    3.6   3.5    3.7      )                                                                                                                        (% of total Medicare      t       3.2                                    3.6          3.8      n                                       3.2          3.6          3.7    3.4      e                                                                              3.3    3.1                                spending)      c                                                                                           2.9      r                                                                                                  2.8   2.7       e 3      P      (                                                                                                                       Inpatient rehabilitation                    2.1    2.2   2.1    1.9              1.8                             1.5                                                                             spending (% of total                                                     1.4   1.3    1.2   1.2    1.2   1.2    1.2   1.2    1.1   1.1        0                                                                                                                     Medicare spending)             2001   2002  2003   2004  2005   2006  2007   2008  2009   2010  2011  2012   2013  2014   2015  2016   Total Medicare spending on post-acute services ~$60 billion in 2016                                                                                                                                                        Projected                                                                                                                                           2016           2018                                                                                                                  Post-acute $35                                                                                                                                    Medicare        Medicare                                                                                                                    settings             margin**       margin** $30                                                                                                             Skilled nursing facilities    11.4%            9.0% $25  $20                                                                                                         Home health agencies*         15.5%           14.4%  $15                                                                                                             Inpatient rehabilitation      13.0%           11.9% $10                                                                                                         hospitals   $5                                                                                                         Long-term acute care                                                                                                             hospitals                      4.1%             4.7%***  $0         2001 2002  2003 2004  2005  2006 2007  2008  2009 2010  2011  2012 2013  2014 2015  2016                                                       * Not all home health spending occurs as a post-acute service.           ** 2016 Medicare margin / Projected 2018 Medicare margin - skilled nursing and home health data represents freestanding facilities and agencies only.                   *** 2018 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 2018 – pages 205, 206, 227, 241, 242, 267, 268, 269, 297, 298, and 299;          86                                         MedPAC, Health Care Spending and the Medicare Program, June 2017 – page 112
 Different levels of services                    Inpatient rehabilitation hospital                                       Nursing home  Average length of stay                             = 12.7 days     Average length of stay                                         = 38.4 days Discharge to community                          = 76.9%            Discharge to community                       = 39.5% 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 2018 - pages 215, 219, 226, 278, and 280       87
 Supply of IRFs is relatively stable                                                                                                 Average annual change                 Share of                Medicare                discharges Type of IRF      2016      2004     2006    2008    2010     2013    2014    2015     2016    2006-2013   2013-2016  All IRFs         100%      1,221    1,225   1,202   1,179    1,161   1,177   1,182    1,188     -0.8%        0.8%  Urban              93      1,024    1,018   1,001    981      977    1,013   1,020    1,026      -0.6         1.6 Rural              7        197      207     201     198      184     164     162      162       -1.7        -4.2  Freestanding       50       217      217     221     233      243     251     262      273       1.6          4.0 Hospital based     50      1,004    1,008    981     946      918     926     920      915       -1.3        -0.1  Nonprofit          41       768      758     738     729      677     681     681      676       -1.6          — For profit         52       292      299     291     294      322     338     352      370       1.1          4.7 Government         7        161      168     173     156      155     149     138      133       -1.1        -5.0     Encompass Health                   Source: MedPAC, Medicare Payment Policy, March 2018 - page 277               88
 Inpatient rehabilitation sector margins                       Share of                     Medicare                    discharges                                      Margins  Type of IRF          2016      2004     2006     2008     2010      2012     2013     2014     2015     2016  All IRFs             100%      16.7%    12.5%     9.4%     8.6%    11.2%     11.5%    12.4%    13.8%    13.0%   Urban                 93       17.0      12.8     9.6      9.0      11.6     11.9     12.8      14.2     13.2  Rural                 7        13.2      10.0     6.9      4.7       6.5      6.0      6.2      8.3      9.5   Freestanding          50       24.7      17.5     18.2     21.4     23.9     24.7     25.3      26.7     25.5  Hospital based        50       12.2      9.9      3.9      -0.5      0.7     -0.1      0.9      1.9      1.2   Nonprofit             41       12.8      11.0     5.3      2.1       2.1      1.1      2.0      3.5      2.0  For profit            52       24.4      16.3     16.9     19.6     22.9     23.4     23.8      24.8     23.9  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     -11.2    -10.8     -7.1    -10.3    11 to 24            22       10.5      7.3      1.2      -3.3     -1.2     -0.8      -0.2     -0.4     0.3    25 to 64            48       18.3      13.7     10.1     10.6     12.3     13.2     14.2      15.8     14.6    65 or more          28       21.5      17.8     17.3     17.5     21.0     20.0     20.7      22.9     22.0   Encompass Health                    Source: MedPAC, Medicare Payment Policy, March 2018 - page 285              89
 Inpatient rehabilitation standardized comparison of costs                                                                                                             Quartile                                                                                 Characteristic    Low cost         High cost                           Median standardized      Type of IRF           cost per discharge                                                                                 Percent:                                                                                   Hospital based         38%              94%  All IRFs                        $15,494                                          Freestanding           62                6   Hospital based                  16,406             Median standardized           Nonprofit              31               62                                                                                   For profit             66               20  Freestanding                    11,796            costs per discharge are                                                    lower for freestanding         Government              3               17                                                   IRFs and larger facilities.  Nonprofit                       16,311                                           Urban                  94               80  For profit                      13,315                                           Rural                   6               20  Government                      17,813             High margin IRFs            Median Medicare margin:                                                   (both hospital-based            All                  28.4%          -22.1%  Urban                           15,185          and freestanding) are            Hospital based       23.4            -22.1  Rural                           17,914           concentrated in the             Freestanding         31.0            -23.1                                                   low-cost quartile of                                                                                 Median:  Number of beds                                   standardized costs.                                                                                   Number of beds         48               18     1 to 10                      18,588                                           Occupancy rate        72%              53%     11 to 24                     16,408     25 to 64                     14,239                                         Median costs per discharge:     65 or more                   12,103                                           All               $11,490          $19,873                                                                                   Hospital based     12,158           19,860                                                                                   Freestanding       10,854           20,417   Encompass Health                    Source: MedPAC, Medicare Payment Policy, March 2018 - page 286 and 287                   90
 “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                                                                              91
 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                                                                              92
 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 112-116 for end notes.                                               93
 Segment operating results   Encompass Health                        94
 Inpatient rehabilitation segment Adjusted EBITDA                                   Q4        Q3        Q2       Q1         Q4       Q3        Q2        Q1      Full Year Full Year    (In millions)                2018      2018      2018     2018       2017     2017      2017     2017       2018       2017    Net operating revenues:     Inpatient                 $  822.8  $  798.4  $  809.6 $  817.1   $  776.9 $  758.2  $  751.5  $ 752.7   $ 3,247.9  $3,039.3     Outpatient and other          22.9      27.2      25.0     23.2       25.5     25.3      26.1      25.1       98.3     102.0        Total segment revenue*    845.7     825.6     834.6    840.3      802.4    783.5     777.6    777.8     3,346.2   3,141.3    Operating expenses:      Salaries and benefits       (437.2)  (423.6)   (416.5)  (424.2)    (408.1)  (403.2)   (394.3)   (398.2)  (1,701.5)  (1,603.8)                   % of revenue    51.7%     51.3%     49.9%    50.5%      50.9%    51.5%     50.7%     51.2%      50.8%     51.1%      Other operating expenses      (a)                         (128.2)  (124.3)   (126.9)  (122.9)    (120.4)  (117.4)   (112.9)   (111.8)    (502.3)   (462.5)      Supplies                     (36.4)   (33.6)    (34.7)   (35.9)     (35.1)   (33.1)    (33.8)    (33.7)    (140.6)   (135.7)      Occupancy costs              (16.4)   (15.9)    (16.0)   (15.5)     (15.6)   (15.7)    (15.5)    (15.1)     (63.8)    (61.9)                                  (181.0)  (173.8)   (177.6)  (174.3)    (171.1)  (166.2)   (162.2)   (160.6)    (706.7)   (660.1)                   % of revenue    21.4%     21.1%     21.3%    20.7%      21.3%    21.2%     20.9%     20.6%      21.1%     21.0%    Equity in nonconsolidated      affiliates                    2.0       1.9       1.6      2.0        1.7      1.9       1.8       1.9        7.5       7.3    Other income(b)                 0.1       1.8       1.2      0.5        1.2      1.0       0.9       1.0        3.6       4.1    Noncontrolling interests(c)    (17.9)   (19.0)    (19.8)   (20.5)     (19.0)   (16.7)    (15.4)    (16.5)     (77.2)    (67.6)    Segment Adjusted EBITDA    $  211.7  $ 212.9   $ 223.5  $  223.8   $ 207.1  $  200.3  $ 208.4   $ 205.4   $  871.9   $  821.2     In arriving at Adjusted    EBITDA, the following was    excluded: (a) Loss (gain) on disposal of      assets                   $    3.5  $   (1.0) $    2.4 $    0.8   $    1.3 $    3.1  $    0.8  $   (0.4) $     5.7  $    4.8 (b) Change in fair market value      of equity securities(25) $    0.8  $    0.1  $    0.4 $    0.6   $     —  $      —  $     —   $     —   $     1.9  $      — (c) Tax reform impact on      noncontrolling interests(26) $  —  $     —   $     —  $      —   $    0.5 $      —  $     —   $     —   $      —   $    0.5                                       Reconciliations to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes.  Encompass Health                                                                                                             95                               * See page 37 for discussion of the Company’s adoption of a new revenue recognition accounting standard.
 Home health and hospice segment Adjusted EBITDA                                        Q4       Q3       Q2        Q1        Q4       Q3       Q2       Q1      Full Year  Full Year     (In Millions)                   2018     2018     2018      2018      2017     2017     2017     2017       2018       2017     Net operating revenues:       Home health revenue         $  215.3 $  209.2  $ 204.8  $ 185.3   $ 186.3  $  180.3 $  171.9  $ 163.9   $  814.6   $  702.4       Hospice revenue                 35.0     32.8     28.3     20.4      20.1      17.8     16.9     15.4      116.5        70.2        Total segment revenue*        250.3    242.0    233.1    205.7     206.4     198.1    188.8    179.3      931.1      772.6     Operating expenses(a)       Cost of services              (116.1)  (114.6)  (109.1)    (98.6)    (96.0)   (92.1)   (87.5)   (87.7)     (438.4)    (363.3)                      % of revenue     46.4%    47.4%    46.8%    47.9%     46.5%     46.5%    46.3%    48.9%      47.1%       47.0%       Support and overhead costs     (88.3)   (82.4)   (80.8)    (72.0)    (73.8)   (68.9)   (67.7)   (66.8)     (323.5)    (277.2)                      % of revenue     35.3%    34.0%    34.7%    35.0%     35.8%     34.8%    35.9%    37.3%      34.7%       35.9%                                     (204.4)  (197.0)  (189.9)   (170.6)   (169.8)  (161.0)  (155.2)  (154.5)     (761.9)    (640.5)                      % of revenue     81.7%    81.4%    81.5%    82.9%     82.3%     81.3%    82.2%    86.2%      81.8%       82.9%     Other income                        —        —       0.5        —         —        —        —         —        0.5          —     Equity in net income of       nonconsolidated affiliates       0.3      0.2      0.4      0.3       0.1       0.2      0.2      0.2        1.2         0.7     Noncontrolling interests(b)       (2.1)    (2.0)    (2.5)     (1.9)     (2.3)    (2.5)    (1.0)    (1.1)       (8.5)      (6.9)     Segment Adjusted EBITDA       $  44.1  $  43.2   $  41.6  $  33.5   $  34.4  $  34.8  $  32.8   $  23.9   $  162.4   $  125.9      In arriving at Adjusted EBITDA,     the following was excluded: (a) Gain on disposal of assets    $     —  $     —   $     —  $     —   $     —  $   (0.1) $    —   $  (0.1)  $      —   $    (0.2) (b) SARs mark-to-market impact       on noncontrolling interests       (see page 69)               $   (0.4) $  (0.3) $  (0.9) $   (1.0) $     —  $     —  $     —   $     —   $    (2.6) $      — (b) Tax reform impact on       noncontrolling interests(26) $    —  $     —   $     —  $     —   $   4.1  $     —  $     —   $     —   $      —   $     4.1                                         Reconciliations to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes.   Encompass Health                                                                                                             96                                * See page 37 for discussion of the Company’s adoption of a new revenue recognition accounting standard.
 Segment operating results                                                               Q4 2018                                                 Q4 2017                                                        Home                                                    Home                                                     Health and                                              Health and (In Millions)                              IRF        Hospice     Reclasses   Consolidated         IRF        Hospice     Reclasses   Consolidated Net operating revenues                 $     845.7  $     250.3  $         —  $     1,096.0   $      802.4  $     206.4  $         —  $     1,008.8 Operating Expenses:      Inpatient Rehabilitation:        Salaries and benefits                (437.2)           —        (176.1)       (613.3)        (408.1)           —        (146.5)       (554.6)        Other operating expenses(a)          (128.2)           —         (19.9)       (148.1)        (120.4)           —         (16.6)       (137.0)        Supplies                               (36.4)          —          (4.5)        (40.9)         (35.1)           —          (3.6)        (38.7)        Occupancy                              (16.4)          —          (3.9)        (20.3)         (15.6)           —          (3.1)        (18.7)      Home Health and Hospice:        Cost of services sold (excluding         depreciation and amortization)           —        (116.1)      116.1              —              —        (96.0)        96.0             —        Support and overhead costs                —         (88.3)        88.3             —              —        (73.8)        73.8             —                                             (618.2)       (204.4)          —         (822.6)        (579.2)      (169.8)           —         (749.0) Other income(b)                                0.1            —            —            0.1            1.2            —            —            1.2 Equity in net income of nonconsolidated   affiliates                                   2.0           0.3           —            2.3            1.7          0.1            —            1.8 Noncontrolling interests(c)(d)                (17.9)        (2.1)          —          (20.0)         (19.0)         (2.3)          —          (21.3)      Segment Adjusted EBITDA           $     211.7  $      44.1  $         —          255.8   $      207.1  $      34.4  $         —         241.5 General and administrative expenses(e)                                                (34.0)                                                  (33.3)      Adjusted EBITDA                                                          $       221.8                                           $      208.2    In arriving at Adjusted EBITDA, the following were excluded: (a)  Loss on disposal of assets        $       3.5  $         —  $         —  $         3.5   $        1.3  $         —  $         —  $         1.3 (b)  Change in fair market value of    $       0.8  $         —  $         —  $         0.8   $          —  $         —  $         —  $          —        equity securities(25) (c)  SARs mark-to-market impact on     $         —  $       (0.4) $        —  $        (0.4)  $          —  $         —  $         —  $          —        noncontrolling interests (see        page 69) (d)  Tax reform impact on        noncontrolling interests(26)    $         —  $         —  $         —  $           —   $        0.5  $       4.1  $         —  $         4.6 (e)  Stock-based compensation          $         —  $         —  $         —  $        20.3   $          —  $         —  $         —  $         9.8    Encompass Health                       Reconciliations to GAAP provided on pages 99-110; Refer to pages 112-116 for end notes.               97
 Segment operating results                                                   Year Ended December 31, 2018                           Year Ended December 31, 2017                                                        Home                                                    Home                                                     Health and                                              Health and (In Millions)                              IRF        Hospice     Reclasses   Consolidated         IRF        Hospice     Reclasses   Consolidated Net operating revenues                 $   3,346.2  $     931.1  $         —  $     4,277.3   $    3,141.3  $     772.6  $         —  $     3,913.9 Operating Expenses:      Inpatient Rehabilitation:        Salaries and benefits               (1,701.5)          —        (652.5)     (2,354.0)      (1,603.8)           —        (550.8)     (2,154.6)        Other operating expenses(a)          (502.3)           —         (77.1)       (579.4)        (462.5)           —         (64.5)       (527.0)        Supplies                             (140.6)           —         (18.1)       (158.7)        (135.7)           —         (13.6)       (149.3)        Occupancy                              (63.8)          —         (14.2)        (78.0)         (61.9)           —         (11.6)        (73.5)      Home Health and Hospice:        Cost of services sold (excluding         depreciation and amortization)           —        (438.4)      438.4              —              —       (363.3)       363.3             —        Support and overhead costs                —        (323.5)      323.5              —              —       (277.2)       277.2             —                                            (2,408.2)      (761.9)          —       (3,170.1)      (2,263.9)      (640.5)           —       (2,904.4) Other income(b)                                3.6           0.5           —            4.1            4.1            —            —            4.1 Equity in net income of nonconsolidated   affiliates                                   7.5           1.2           —            8.7            7.3          0.7            —            8.0 Noncontrolling interests(c)(d)                (77.2)        (8.5)          —          (85.7)         (67.6)         (6.9)          —          (74.5)      Segment Adjusted EBITDA           $     871.9  $     162.4  $         —        1,034.3   $      821.2  $     125.9  $         —         947.1 General and administrative expenses(e)(f)                                            (133.3)                                                 (124.0)      Adjusted EBITDA                                                          $       901.0                                           $      823.1    In arriving at Adjusted EBITDA, the following were excluded: (a)  Loss (gain) on disposal of assets $       5.7  $         —  $         —  $         5.7   $        4.8  $       (0.2) $        —  $         4.6 (b)  Change in fair market value of    $       1.9  $         —  $         —  $         1.9   $          —  $         —  $         —  $          —        equity securities(25) (c)  SARs mark-to-market impact on     $         —  $       (2.6) $        —  $        (2.6)  $          —  $         —  $         —  $          —        noncontrolling interests (see        page 69) (d)  Tax reform impact on        noncontrolling interests(26)    $         —  $         —  $         —  $           —   $        0.5  $       4.1  $         —  $         4.6 (e)  Stock-based compensation          $         —  $         —  $         —  $        85.9   $          —  $         —  $         —  $        47.7 (f)  Transaction costs                 $         —  $         —  $         —  $         1.0   $          —  $         —  $         —  $          —    Encompass Health                       Reconciliations to GAAP provided on pages 99-110; Refer to pages 112-116 for end notes.               98
 Reconciliations to GAAP            and share information   Encompass Health                        99
 Reconciliation of net income to Adjusted EBITDA(9)                                                                                          2018                                                Q1                   Q2                   Q3                    Q4                Full Year (in millions, except per share data)     Total   Per Share    Total   Per Share    Total   Per Share     Total   Per Share    Total   Per 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 69)    (1.0)                (0.9)                (0.3)                 (0.4)                (2.6) Change in fair market value of equity securities(25)                               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                                                                                                                           100                                                          Refer to pages 112-116 for end notes.
 Reconciliation of net income to Adjusted EBITDA(9)                                                                                                 2017                                                         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                                       $   84.4           $   79.4            $  85.1            $ 101.3            $  350.2 Loss (income) from disc ops, net of tax,   attributable to Encompass Health                    0.3                (0.2)              0.1                 0.2                0.4 Net income attributable to noncontrolling interests (17.6)             (16.4)              (19.2)             (25.9)             (79.1) Income from continuing operations attributable   to Encompass Health*                               67.1 $   0.70      62.8  $  0.66      66.0  $   0.67      75.6 $   0.61     271.5 $   2.69 Provision for income tax expense                     39.7               28.6               43.1                34.4              145.8 Interest expense and amortization of debt   discounts and fees                                 41.3               40.4               36.8                35.9              154.4 Depreciation and amortization                        45.2               45.8               46.2                46.6              183.8 Loss on early extinguishment of debt(27)                —               10.4                0.3                  —                10.7 Net noncash (gain) loss on disposal of assets        (0.5)               0.8                3.0                 1.3                4.6 Stock-based compensation expense                      8.0               20.7                9.2                 9.8               47.7 Tax reform impact on noncontrolling interests(26)       —                  —                  —                 4.6                4.6 Adjusted EBITDA                                  $  200.8           $  209.5            $ 204.6            $ 208.2            $  823.1  Weighted average common shares outstanding: Basic                                                         88.8               90.3                97.8               97.6               93.7 Diluted                                                       99.0               98.9                99.0               99.2               99.3                                * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Encompass Health                                                                                                                           101                                                          Refer to pages 112-116 for end notes.
 Reconciliation of segment Adjusted EBITDA to income     from continuing operations before income tax expense                                          Q4       Q3       Q2       Q1        Q4       Q3       Q2       Q1          Full Year                                       2018     2018     2018     2018      2017     2017     2017     2017      2018      2017  Total segment Adjusted EBITDA       $ 255.8  $ 256.1  $ 265.1  $  257.3  $ 241.5  $ 235.1  $ 241.2  $  229.3  $1,034.3   $ 947.1 General and administrative expenses    (54.3)   (49.9)   (54.9)   (61.1)    (43.1)   (39.7)   (52.4)   (36.5)    (220.2)   (171.7) Depreciation and amortization          (52.9)   (51.2)   (49.7)   (45.9)    (46.6)   (46.2)   (45.8)   (45.2)    (199.7)   (183.8) (Loss) gain on disposal of assets       (3.5)     1.0     (2.4)    (0.8)     (1.3)    (3.0)    (0.8)     0.5       (5.7)     (4.6) Government, class action, and   related settlements                  (52.0)      —        —         —        —        —         —     —         (52.0)       — Loss on early extinguishment of debt      —        —        —         —        —      (0.3)   (10.4)       —         —      (10.7) Interest expense and amortization of   debt discounts and fees              (36.7)   (37.3)   (37.7)   (35.6)    (35.9)   (36.8)   (40.4)   (41.3)    (147.3)   (154.4) Net income attributable to   noncontrolling interests              19.6     20.7     21.4     21.4      25.9     19.2     16.4     17.6       83.1     79.1 SARs mark-to-market impact on   noncontrolling interests (see page   69)                                    0.4      0.3      0.9      1.0        —        —         —        —        2.6        — Change in fair market value of equity   securities(25)                        (0.8)    (0.1)    (0.4)    (0.6)       —        —         —        —       (1.9)       — Tax reform impact on noncontrolling   interests(26)                           —        —        —         —      (4.6)      —         —        —         —       (4.6) Income from continuing operations   before income tax expense         $   75.6 $  139.6 $  142.3 $  135.7  $  135.9 $  128.3 $  107.8 $  124.4  $   493.2  $ 496.4    Encompass Health                                 Refer to pages 112-116 for end notes.                                      102
 Adjusted EPS(10) - Q4 2018                                                                                 For the Three Months Ended December 31, 2018                                                                                                Adjustments                                                                                         Mark-to-Market                                                                        Government,     Adjustment for                 Change in fair                                                                         Class Action,      Stock                       Market Value                                                                As        & Related     Compensation     Income Tax       of Equity        As                                                             Reported    Settlements       Expense       Adjustments    Securities(25)  Adjusted                                                                                    (In Millions, Except Per Share Amounts) Adjusted EBITDA                                             $  221.8   $           —   $            —   $         —   $           —   $    221.8 Depreciation and amortization                                   (52.9)             —                —             —               —         (52.9) Government, class action, and related settlements               (52.0)          52.0                —             —               —            — Interest expense and amortization of debt discounts and fees    (36.7)             —                —             —               —         (36.7) Stock-based compensation                                        (20.3)             —              4.6             —               —         (15.7) Loss on disposal of assets                                       (3.5)             —                —             —               —          (3.5) SARs mark-to-market impact on noncontrolling interests (see   page 69)                                                        0.4              —              (0.4)           —               —            — Change in fair market value of equity securities(25)             (0.8)             —                —             —              0.8           —     Income from continuing operations before income tax       expense                                                    56.0           52.0              4.2             —              0.8       113.0 Provision for income tax expense                                (29.4)             —              (1.2)         (1.9)           (0.2)       (32.7)     Income from continuing operations attributable to       Encompass Health                                      $   26.6   $        52.0   $          3.0   $       (1.9) $          0.6  $     80.3     Add: Interest, amortization, and loss on extinguishment       of convertible debt, net of tax                              —                                                                           —     Numerator for diluted earnings per share                $   26.6                                                                  $     80.3 Diluted earnings per share from continuing operations, as   reported*                                                 $   0.26   $        0.52   $         0.03   $      (0.02) $        0.01   $     0.80 Diluted shares used in calculation                             100.0    Encompass Health                    Reconciliation to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes.                 103                                                    * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - Q3 2018                                                                        For the Three Months Ended September 30, 2018                                                                                         Adjustments                                                                         Mark-to-Market                   Change in                                                                          Adjustment for                 Fair Market                                                                              Stock                        Value of                                                                 As       Compensation     Income Tax       Equity        As                                                              Reported       Expense       Adjustments   Securities(25) Adjusted                                                                            (In Millions, Except Per Share Amounts) Adjusted EBITDA                                              $  224.3   $             —  $          —  $          —   $  224.3 Depreciation and amortization                                    (51.2)               —             —             —       (51.2) Interest expense and amortization of debt discounts and fees     (37.3)               —             —             —       (37.3) Stock-based compensation                                         (18.1)             4.2             —             —       (13.9) Gain on disposal of assets                                         1.0                —             —             —         1.0 SARs mark-to-market impact on noncontrolling interests (see   page 69)                                                         0.3              (0.3)           —             —          — Change in fair market value of equity securities(25)              (0.1)               —             —            0.1         —     Income from continuing operations before income tax      expense                                                     118.9              3.9             —            0.1      122.9 Provision for income tax expense                                 (30.2)             (1.1)         (0.7)           —       (32.0)     Income from continuing operations attributable to      Encompass Health                                        $    88.7  $           2.8  $        (0.7) $        0.1  $    90.9     Add: Interest, amortization, and loss on extinguishment of      convertible debt, net of tax                                   —                                                         —     Numerator for diluted earnings per share                 $    88.7                                                $    90.9 Diluted earnings per share from continuing operations, as   reported*                                                  $    0.89  $          0.03  $      (0.01) $          —   $    0.91 Diluted shares used in calculation                              100.0    Encompass Health                Reconciliation to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes.      104                                              * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - Q2 2018                                                                      For the Three Months Ended June 30, 2018                                                                                    Adjustments                                                                       Mark-to-                                                                        Market                       Change in                                                                      Adjustment                    Fair Market                                                                       on Stock                       Value of                                                            As      Compensation     Income Tax        Equity         As                                                        Reported       Expense       Adjustments    Securities(25) Adjusted                                                                       (In millions, except per share amounts)  Adjusted EBITDA                                      $     231.6  $           —   $           —  $          —   $    231.6  Depreciation and amortization                               (49.7)            —               —             —        (49.7)  Interest expense and amortization of debt discounts and    fees                                                      (37.7)            —               —             —        (37.7)  Stock-based compensation                                    (21.4)          10.8              —             —        (10.6)  Loss on disposal of assets                                   (2.4)            —               —             —         (2.4)  SARs mark-to-market impact on noncontrolling interests  (see page 69)                                                0.9            (0.9)             —             —            —  Change in fair market value of equity securities(25)         (0.4)            —               —            0.4           —      Income from continuing operations before income       tax expense                                           120.9             9.9              —            0.4       131.2  Provision for income tax expense                            (29.3)          (2.8)           (0.6)         (0.1)      (32.8)      Income from continuing operations attributable to       Encompass Health                                $      91.6  $          7.1  $         (0.6) $        0.3  $     98.4      Add: Interest, amortization, and loss on       extinguishment of convertible debt, net of tax            —                                                         —      Numerator for diluted earnings per share         $      91.6                                                $     98.4  Diluted earnings per share from continuing    operations, as reported*                           $      0.92  $        0.07   $       (0.01) $          —   $     0.99  Diluted shares used in calculation                          99.6   Encompass Health                Reconciliation to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes.      105                                             * 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(25) 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 69)                               1.0              (1.0)           —            —              —          — Change in fair market value of equity securities(25)   (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 99-110. Refer to pages 112-116 for end notes.      106                                              * 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(25) 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 69)        2.6               —               (2.6)            —            —              —          —  Change in fair market value of equity     securities(25)                              (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 99-110. Refer to pages 112-116 for end notes.                 107                                                   * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - 2017                                                                         For the Year Ended December 31, 2017                                                                                   Adjustments                                                             Mark-to-                                                             Market                                                           Adjustment                                                            for Stock                      Loss on Early                                                  As      Compensation     Tax Reform     Extinguishment    Income Tax        As                                               Reported      Expense        Impact(26)      of Debt(27)   Adjustments(28)  Adjusted                                                                       (In millions, except per share amounts) Adjusted EBITDA                               $  823.1   $           —  $            —  $             —  $            —   $   823.1 Depreciation and amortization                    (183.8)             —               —                —               —      (183.8) Loss on early extinguishment of debt(27)          (10.7)             —               —              0.3               —       (10.4) Interest expense and amortization of debt   discounts and fees                             (154.4)             —               —                —               —      (154.4) Stock-based compensation                          (47.7)          13.3               —                —               —       (34.4) Loss on disposal of assets                         (4.6)             —               —                —               —        (4.6) Tax reform impact of noncontrolling interests(26)  (4.6)             —             4.6                —               —           —     Income from continuing operations before      income tax expense                           417.3           13.3             4.6              0.3               —       435.5 Provision for income tax expense                 (145.8)           (5.3)          (13.6)            (0.1)           (7.7)    (172.5)     Income from continuing operations      attributable to Encompass Health         $  271.5   $         8.0  $         (9.0) $           0.2  $          (7.7) $   263.0     Add: Interest, amortization, and loss on      extinguishment of convertible debt, net of      tax                                           10.8                                                                        10.8     Numerator for diluted earnings per share  $  282.3                                                                    $   273.8 Diluted earnings per share from continuing   operations, as reported*                    $    2.84  $        0.08  $        (0.09) $             —  $         (0.08) $    2.76 Diluted shares used in calculation                 99.3      Encompass Health                Reconciliation to GAAP provided on pages 99-110. Refer to pages 112-116 for end notes.      108                                                * Adjusted EPS may not sum across due to rounding.
 Adjusted Free Cash Flow History(11)                                                                             Q4                  Full Year   (In Millions)                                                    2018        2017       2018        2017   Net cash provided by operating activities                     $    178.4  $    151.4  $    762.4  $  658.3   Impact of discontinued operations                                    (1.5)      (0.1)       (0.8)      0.6   Net cash provided by operating activities of continuing    operations                                                        176.9       151.3       761.6     658.9   Capital expenditures for maintenance                               (47.6)      (46.2)     (152.9)   (138.3)   Distributions paid to noncontrolling interests of consolidated    affiliates                                                        (18.9)      (13.6)      (75.4)    (51.9)    Items non-indicative of ongoing operating performance:   Transaction costs and related assumed liabilities                    2.9          —          0.5        —   Cash paid for SARs exercise                                            —          —          4.3        —   Adjusted free cash flow                                       $    113.3  $     91.5  $   538.1   $  468.7    Cash dividends on common stock(12)                            $     26.4  $     24.5  $   100.8   $   91.5              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 112-116 for end notes.                              109
 Net cash provided by operating activities reconciled       to Adjusted EBITDA                                                                   Q4                              Full Year  (In Millions)                                             2018      2017      2018      2017      2016      2015      2014  Net cash provided by operating activities               $  178.4  $  151.4  $  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                                                       36.7      35.9     147.3     154.4     172.1     142.9     109.2  Equity in net income of nonconsolidated affiliates           2.3       1.8       8.7       8.0       9.8       8.7      10.7  Net income attributable to noncontrolling interests in   continuing operations                                      (19.6)    (25.9)    (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                (2.8)     (2.0)     (8.3)     (8.6)     (8.5)     (7.7)    (12.6)  Current portion of income tax expense                       30.5      24.9     128.0      85.0      31.0      14.8      13.3  Change in assets and liabilities                             1.1      18.6      (46.0)     7.4      30.1      82.7      48.8  Tax reform impact on noncontrolling interests(26)              —       4.6         —       4.6         —         —         —  Cash (provided by) used in operating activities of   discontinued operations                                     (1.5)     (0.1)     (0.8)     0.6       0.7       0.7       1.2  Transaction costs                                              —         —       1.0         —         —      12.3       9.3  SARS mark-to-market impact on noncontrolling interests   (see page 69)                                               (0.4)       —       (2.6)       —         —         —         —  Change in fair market value of equity securities(25)         0.8         —       1.9         —         —         —         —  Other                                                        (2.7)       —       (3.5)     1.2       0.6       3.2       1.9    Adjusted EBITDA                                       $  221.8  $  208.2  $  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 112-116 for end notes.                                       110
 Share information                                                                         Weighted Average for the Period                                                                       Q4                    Full Year                                                                 2018      2017      2018      2017      2016      Basic shares outstanding(29)                               98.0      97.6      97.9      93.7      89.1       Convertible senior subordinated notes(29)                  —         —         —         4.0       8.5      Restricted stock awards, dilutive stock options, restricted        stock units, and common stock warrants(30)              2.0       1.6        1.9       1.6       1.9      Diluted shares outstanding                                100.0      99.2      99.8      99.3      99.5                                                                                 End of Period                                                                       Q4                    Full Year      (Millions)                                                 2018      2017      2018      2017      2016      Basic shares outstanding(29)                               97.6      97.6      97.6      97.6      88.3   Encompass Health                           Refer to pages 112-116 for end notes.                               111
 End Notes   Encompass Health                                                                                                                           112
 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 July 2017 through June 2018 and claims-based data collected from April 2017 through March 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 March 5, 2019, to which this Investor Reference Book is attached as Exhibit 99.1.     Encompass Health                                                                                                                           113
 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 March 5, 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 March 5, 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 December 31, 2018, the remaining repurchase authorization was $250 million. (14) Beginning in FY 2020, CMS will no longer utilize the functional assessment items contained in the FIMTM instrument as part of the IRF Patient Assessment      Instrument. This will affect patients’ classification into case-mix groupings and length-of-stay values under the IRF-PPS. CMS will be further modifying      the case-mix groupings, length-of-stay values and other definitions in the FY 2020 Notice of Proposed Rulemaking after incorporating a second year of      data in its regression modeling. At present, we are unable to determine the impact the changes to the case-mix classification system starting in FY 2020      would have on Medicare payments beginning Oct. 1, 2019.      Encompass Health                                                                                                                           114
 End Notes, con't.  (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 5.1% 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. (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 12-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) Pre-opening expenses include expenses for training new employees on the clinical information system, which vary based on the timing of the first      admission. (19) The leverage ratio is based on trailing four quarters of Adjusted EBITDA. (20) Represents discharges from 129 consolidated hospitals in Q4 2018; 128 consolidated hospitals in Q3 2018; 127 consolidated hospitals in Q2 2018; 126      consolidated hospitals in Q1 2018 and Q4 2017; 125 consolidated hospitals in Q3 2017; 124 consolidated hospitals in Q2 2017; and 122 consolidated      hospitals in Q1 2017 (21) 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. (22) 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. (23) Represents home health admissions from 218 consolidated locations in Q4 2018; 214 consolidated locations in Q3 2018; 213 consolidated locations in Q2      2018; 196 consolidated locations in Q1 2018; 198 consolidated locations in Q4 2017; 196 consolidated locations in Q3 2017; and 191 consolidated      locations in Q2 2017 and Q1 2017 (24) Represents hospice admissions from 58 locations in Q4 2018; 57 locations in Q3 2018 and Q2 2018; 38 locations in Q1 2018; 37 locations in Q4 2017, Q3      2017 and Q2 2017; and 35 locations in Q1 2017 (25) During the first quarter of 2018, the Company adopted Accounting Standards Update No. 2016-01, “Financial Instruments - Overall (Topic 825):      Recognition and Measurement of Financial Assets and Liabilities,” and began recognizing mark-to-market gains and losses associated with available-for-      sale securities through net income instead of accumulated other comprehensive income.     Encompass Health                                                                                                                           115
 End Notes, con't.  (26) 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. (27) The interest and amortization and the loss on early extinguishment of debt related to the convertible senior subordinated notes must be added to      income from continuing operations when calculating diluted earnings per share because the debt was assumed to have been converted at the beginning      of the period, and the applicable shares were included in the diluted share count. (28) New guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” requires entities to record all of the tax effects related      to share-based payment at settlement (or expiration) through the income statement. Historically, the Company recorded such tax effects to equity. (29) 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. (30) The agreement to settle the Company’s class action securities litigation received final court approval in Jan. 2007. The 5.0 million shares of common      stock and warrants to purchase ~8.2 million shares of common stock at a strike price of $41.40 (expired Jan. 17, 2017) related to this settlement were      issued on Sept. 30, 2009. The 5.0 million common shares are included in the basic outstanding shares. The warrants were not included in the diluted      share count prior to 2015 because the strike price had historically been above the market price. In full-year 2016, zero shares related to the warrants      were included in the diluted share count due to antidilution based on the stock price.     Encompass Health                                                                                                                           116