Investor Reference Book Post Q2 2018 Earnings Release Last Updated August 14, 2018              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, 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, 2017, the Form 10-Q for the quarters ended March 31, 2018 and June 30, 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 August 14, 2018, 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  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-16      Investment Thesis and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17-24      Business Outlook, Including Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-40      Growth  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41-52      Alternative Payment Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53-57      Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58-63      Information Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64-67      Operational Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68-73      Industry Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74-86      Segment Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87-92      Reconciliations to GAAP and Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93-104      End Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105-109   Encompass Health                                                                              3
 Company Overview   Encompass Health is a leading provider of inpatient rehabilitation and  home-based care committed to delivering high-quality, cost-effective,           integrated care across the post-acute continuum.   Encompass Health                                               4
 Encompass Health                     A Leading Provider of Inpatient Rehabilitation                                         and Home-Based Care                                                                                             Market Overlap                                                                                 ~60% of EHC’s IRFs have an EHC                                                                                  home health location within an                                                                                   approximate 30-mile radius.*                                                                                   Portfolio as of June 30, 2018                                                                               Inpatient Rehabilitation Hospitals (“IRFs”)                                                                               Home Health Locations                                                                               Hospice Locations                                                                               6 Future IRFs**                                                                            36 States and Puerto Rico  ~40,000 Employees   Inpatient Rehabilitation - 06/30/18                                          Home Health and Hospice - 06/30/18     128  IRFs (42 are Joint Ventures)                                            215  Home Health Locations      31  States and Puerto Rico                Largest Owner and                  57  Hospice Locations ~29,900  Employees                               Operator of IRFs                 30  States     22%  of Licensed Beds†                                                   ~10,100  Employees     30%  of Medicare Patients Served†        4th Largest Provider of             Key Statistics - Trailing 4 Quarters     Key Statistics - Trailing 4 Quarters    Medicare-Certified Skilled       131,118  Home Health Admissions                                               Home Health Services 176,976  Inpatient Discharges                                                   6,018 Hospice Admissions   ~$3.3  Billion in Revenue                                                    ~$843  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 128 IRFs and two of the 215 home health locations are nonconsolidated. 5                                             These locations are accounted for using the equity method of accounting.
 Company Overview              Inpatient Rehabilitation      Inpatient Rehabilitation         109 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 105-109 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 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                        Referral Sources:                                                  Referral Sources:                  Acute Care Hospitals – 91%                                         Acute Care Hospitals – 35%              Physician Offices / Community – 7%                                Physician Offices / Community – 38%                 Skilled Nursing Facilities – 2%                                      IRFs / LTCHs / SNFs – 27%    Rehabilitation Impairment Category*         YTD-18      2017         Demographics of all Medicare Home Health Users**: RIC 01    Stroke                                  18.2%    18.0%      100 RIC 02/03 Brain dysfunction                       10.2%    10.1%       90 RIC 04/05 Spinal cord dysfunction                  3.7%     4.0%       80                                                                       e 70 RIC 06    Neurological conditions                 21.1%    21.6%     g                                                                      a                                                                      t 60 RIC 07    Fracture of lower extremity              7.8%     7.9%     n                                                                      e                                                                       c 50 RIC 08    Replacement of lower extremity joint     3.8%     4.1%     r                                             85.1%                                                                      e  RIC 09    Other orthopedic                         8.9%     9.3%     P 40 RIC 10/11 Amputation                               2.7%     2.6%       30                                                                                            36.7% RIC 14    Cardiac                                  4.5%     4.3%       20      24.0%                   31.9% RIC 17/18 Major multiple trauma                    4.9%     5.3%       10 RIC 20    Other disabling impairments             11.2%    10.0%              Age 85+       Lives     Has 2 or    Has 3 or                                                                                              alone     more ADL  more chronic   —       All other RICs                           3.0%     2.8%                                                                                                      limitations  conditions          Average Age of the Company’s IRF Patients:                   Average Age of the Company’s Home Health Patients:              All Patients = 71    Medicare FFS = 76                             All Patients = 76    Medicare FFS = 77                      Admission to an IRF:                                            Admission to home health:  •  Physicians and acute care hospital case managers are key        •  For Medicare, a patient must be confined to the home and need     decision makers.                                                   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  •  All IRF patients must be medically stable and have potential to    periodically reviewed by a physician.     tolerate three hours of therapy per day (minimum).              •  Medicare also requires a face-to-face encounter related to the  •  IRF patients receive 24-hour, 7 days a week nursing care.          primary reason the patient requires home health services with a  •  Average length of stay = 12.7 days                                 physician or an allowed non-physician practitioner.                             * Rehabilitation Impairment Categories (RICs) represent how the Company admitted the patient; BPCI (pages 55-56)    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 2017
 Leading Positions in Quality of Care                  IRF Quality                                     Home Health Quality        Discharge to Community                                                                     3.8                79.4%    79.7%     Percent of cases       78.7%                                     discharged to                                  Quality of Care                     76.6%   75.7%    76.0%                   the community,                                   Star Ratings(3)                                    including home                                                            3.3                93% of our home health agencies                                     or home with                                     home health.                                   are 3 Stars or higher;                                    Higher is better.                             50% are 4 Stars or higher      2016    2017    YTD-18      Discharge to Skilled Nursing                                       Percent of                                  Patient Satisfaction    13.1%    12.7%                                           3.7     3.7                     12.4%             patients                                      Star Ratings(3)       10.1%                        discharged to a                9.3%      9.1%                                                 93% of our home health agencies                                    skilled nursing                                                                                    are 3 Stars or higher;                                       facility.                                     Lower is better.                              66% are 4 Stars or higher     2016     2017     YTD-18        Discharge to Acute Hospital                                100 bps better                                       Percent of            16.9%                       30-Day        10.7%     10.7%                 patients                          10.5%                                                    Readmission Rate   10.4%     10.4%    10.3%        discharged to an                                      acute care                    15.9%           Percent of patients                                       hospital.                               readmitted to an acute care                                    Lower is better.                             hospital. Lower is better.      2016     2017    YTD-18             UDSMR(2)                  Encompass Health        National Average      Encompass Health  Encompass Health                        Refer to pages 105-109 for end notes.                          9
 Leading Position in Cost Effectiveness                              Inpatient Rehabilitation                                                                                Avg. Est.                                                                 Avg. Est.      Total                                             Avg.                Total Cost   Payment          Medicare pays                                  Avg.     Medicare     Case        per          per           Encompass Health                                  Beds    Discharges    Mix      Discharge    Discharge        less per discharge,                          #      per IRF   per IRF(5)  Index(6) for FY 2019  for FY 2019                                                                                               on average, and      Encompass      Health(4) =       126        67        951       1.28      $13,622     $20,315           Encompass Health                                                                                               treats a higher    Free-Standing =                                                                             acuity patient. (Non-Encompass Health) 154        58        589       1.27      $18,107     $21,400                                                                                              The Company differentiates                                                                                            itself by:                                                                                                    Hospital                                                                                 “Best Practices” clinical       Units =          846        24        228       1.22      $21,483     $21,569            protocols                                                                                               Supply chain efficiencies                                                                                               Sophisticated                                                                                                management information                                                                                                systems                                                                                               Economies of scale        Total(7)       1,126       34        358       1.25      $18,388     $21,159                                                                                                       (8)    Encompass Health    The average estimated total payment per discharge, as stated, does not reflect a 2% reduction for sequestration. 10                                                   Refer to pages 105-109 for end notes.
 Leading Position in Cost Effectiveness                  Home Health                                                       Average                  Average revenue per                              Average     Average    Revenue                  episode is 5.7%                    2017      Revenue      Visits    per Visit    Cost                  Episodes   per Episode per Episode (all payors) per Visit   higher than the peer                                                                              average due to higher   Encompass                                                                  acuity patient mix.     Health       211,743     $2,998       17.9       $161        $75                                                                               Cost per visit is 7.4%                                                                              lower due to market                                                                              density and operational   Public Peer                  283,366     $2,835      17.4*      $148*        $81*        efficiency:    Average                                                                    Caregiver                                                                                  optimization                                                                               Optimization of HCHB                                                                               Employee culture of                                                                                 excellence Comparison to                                                                                               5.7%        2.9%       8.8%       (7.4)%         ~75% of visits   Peer Average                                                                    conducted by full-                                                                                  time staff                                                                               Daily monitoring of       Public peer average represents 2017 data from publicly traded home health providers.     productivity                      * Kindred did not report visit counts in 2017.      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)                                                                                                                    Hilton Head, SC (38 beds)            20.0                         Hot Springs, AR (27 beds)                                                                                                                     Pearland, TX            15.0                                                                  Gulfport, MS (33 beds)              (40 beds)                                                                                Westerville, OH (60 beds)             10.0                                                                                   Jackson, TN                                                                                                     (48 beds)                                                                        Modesto, CA                                                                          (50 beds)             5.0               0.0                    Q3 2015   Q4 2015   Q1  2016   Q2 2016   Q3 2016    Q4 2016   Q1 2017   Q2  2017   Q3 2017   Q4 2017    Q1 2018   Q2 2018   Discharges      Q3 2015    Q4 2015   Q1 2016    Q2 2016   Q3 2016    Q4 2016   Q1 2017   Q2 2017    Q3 2017   Q4 2017    Q1 2018   Q2 2018   New Store         5.7%      15.6%     14.2%      11.7%     10.7%      1.3%       1.2%      1.9%      2.4%       2.0%      1.9%       1.6%   Same Store*       3.9%       3.0%      2.8%      1.9%       1.9%      0.1%       1.6%      1.6%      1.4%       3.9%      4.8%       3.6%   Total by Qtr.     9.6%      18.6%     17.0%      13.6%     12.6%      1.4%       2.8%      3.5%      3.8%       5.9%      6.7%       5.2%   Total by Year               10.9%                                     10.8%                                     4.0%   Same-Store   Year*                        3.2%                                     1.7%                                      1.8%   Same-Store   Year UDS**                   1.3%                                    (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 agencies in 7 states)                                     in November 2015                    60.0                     50.0                     40.0                                                                                                   Acquired Camellia Healthcare                     30.0                                                                       (14 home health agencies in 3 states)                                                                                                             in May 2018                     20.0                     10.0                      0.0        Admissions           Q1Q1 20162016 Q2Q2 20162016 Q3Q3 20162016 Q4Q4 20162016 Q1Q1 20172017 Q2Q2 20172017 Q3Q3 20172017 Q4Q4 20172017 Q1Q1 20182018 Q2Q2 20182018       New Store             43.5%      41.6%      35.4%      8.1%       5.7%       6.4%       6.7%      3.5%       2.5%       5.3%       Same Store*           12.6%      11.1%      15.3%      14.0%     13.9%      13.3%       8.8%      10.1%      7.4%       5.1%       Total by Quarter      56.1%      52.7%      50.7%      22.1%     19.6%      19.7%      15.5%      13.6%      9.9%       10.4%       Total by Year                                          43.6%                                      17.0%       Same-Store Year*                                       13.7%                                      11.4%               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 the first half of 2018, the Company acquired or opened 18 home health locations.  Encompass Health                      * Includes consolidated home health agencies classified as same store during each period               13
 Payors (Q2 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 (“HHRG”)                                                  Health &                                 Rehab                                  •  An episode is paid in two installments:                                                   Hospice                                Segment                                    1) Request for Anticipated Payment (“RAP”)                                                  Segment                  2) Final bill after episode is complete                                                                      Per Diem/Visit or CMG/Episodes Medicare Advantage              72.8%             85.5%               - 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                                   9.4%                                   10.4%                                                     9.3%                                   3.2%                                 Variety of methodologies Other                                               3.7%                                   4.2%                           1.2%                                                              0.3%     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,  107 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 25 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 128* IRFs as of June 30, 2018  Real Estate Ownership                                    P 89 owned and 39 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
 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                                               17
 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                                                                                                18
 Strategy       The Company’s strategy is to expand its network of inpatient rehabilitation   hospitals and home health and hospice agencies, 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      Sustained     Post-Acute  and High-Quality Resources     Technology      Growth       Innovation    Outcomes   Encompass Health                                                       19
 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      109 Encompass Health inpatient rehabilitation hospitals hold one or more disease-                          specific certifications, including 107 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            Innovation    Ongoing innovation with initiatives such as the Post-Acute Innovation Center                          Active participant in various alternative payment models   Encompass Health                                                                                      20
 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.  ▪ To succeed, providers must be able to 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                                                       21
 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            Therapy           Therapy   Present Gym &            Gym &             Gym &          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                                                                22
 The Company Continues to Improve the Patient     Experience Through Integrated Care Delivery        Inpatient Rehabilitation–Home Health Clinical Collaboration (All Payors)                                          Overlap Markets*                                                                                          33.2%   u  As of June 30, 2018, ~60% of Encompass Health’s             28.6%                Collaboration Rate      inpatient rehabilitation hospitals were located          Collaboration Rate      within overlap markets.*   u      The clinical collaboration rate with Encompass               4,305                   5,219      Health’s inpatient rehabilitation hospitals      increased by 460 basis points in Q2 2018      compared to Q2 2017.   u  The clinical collaboration rate objective for      overlap markets is 35% to 40% within the next      two years.   u  The objectives of clinical collaboration are to      improve the patient experience and outcomes                                                                   10,770      and to reduce the total cost of care across a                                       10,486      post-acute episode.       Coordination between our IRFs and home        health teams is helping to decrease discharges        to skilled nursing facilities, increase discharges        to home, and improve patient satisfaction.                                                                  Q2 2017                Q2  2018                                                                           Encompass Health Home Health                                                     Encompass Health                                                     IRF Discharges to:                                                                           Non-Encompass Health Home Health                         * Overlap markets have an Encompass Health IRF and an Encompass Health home health location within an Encompass Health        approximate 30-mile radius, excluding markets that have home health licensure barriers. Home health 23                         locations in overlap markets are open for 12 months before inclusion in the clinical collaboration rate.
 Clinical Initiatives to Further Improve Quality   Reduce Acute Care Transfers                               Pain Control / Reducing                                   Infection Control                                        Clinical Collaboration   (tracked in the IRF QRP*)                                 the Use of Opioids                                                                                                  Problem:          Problem:                                      Problem:                                        Poor coordination of the discharge    Acute care transfers can                                     Problem:                                 Infections are a threat                                 process between healthcare   negatively influence patient                               Overprescription of                                to patient safety and add                              providers can result in challenges    outcomes and result in                               opioids has contributed to a                                 to growing healthcare                                   with the transition of care,    unnecessary healthcare                                 nationwide opioid crisis.                                        costs.                                       unnecessary duplication of services,  expenditures and penalties.                                                                                        and avoidable medical errors.                                                                                                   Solution:           Solution:                   Solution:                  Solution:              Develop clinical protocols and   Utilize extensive proprietary Standardize and improve  A multidisciplinary approach   coordinated discharge planning   database of IRF patients to infection control practices     to improve pain          between IRFs and home health  engage in predictive modeling  across the company in     management, including      agencies; implemented TeamWorks  to identify patients at risk for order to reduce the risk of nonpharmacologic treatment initiative to standardize best practices    acute care transfer and     infection to patients and of pain and vigilant opioid   across all overlap markets; and    implement intervention       apply evidenced-based       stewardship, will be    integrate Care Transition Coordinators       strategies as part       decision making in EHC’s   implemented across the       to implement patient-centered      of the plan of care.               IRFs.                   company.            transition plans that promote quality,                                                                                          safety and patient choice.     Encompass Health                             * IRF Quality Reporting Program                                    24
 Business Outlook, Including Guidance               (as of August 14, 2018)    Encompass Health                        25
 Priorities for 2018                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 22)                                        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 agencies                    Demographic trends driving increased demand for skilled home health services                     and in-home hospice services                                        Home health benefiting from skilled nursing facility (“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                    Build scale in hospice service line                 OPERATIONAL INITIATIVES                 CAPITAL STRUCTURE   Encompass Health                                                                              26
 Priorities for 2018           GROWTH          OPERATIONAL INITIATIVES           u Implement rebranding and name change (see page 33)           u Continue to develop and implement post-acute patient navigation tools              • Post-Acute Innovation Center                 ü  Enhanced data analytics to design post-acute clinical pathways                 ü  Formation of post-acute networks including third-party providers           u Continue to enhance clinical collaboration between the Company’s IRFs and home health             locations, including TEAMWORKS initiative to extend best practices across all overlap             markets           u Refine and expand use of predictive data analytics to further improve patient outcomes             (e.g., ReAct; Sepsis Alert)           u Increase participation in alternative payment models           CAPITAL STRUCTURE           u  Maintain real estate ownership and balance sheet flexibility           u  Consider opportunistic refinancings           u  Continue to augment returns from investments in operations with shareholder              distributions   Encompass Health                                                                              27
 Guidance - as of August 14, 2018      Previous 2018 Full-Year             Updated 2018 Full-Year            Guidance                            Guidance                                          (Provided Initially on July 25, 2018)     Net Operating Revenues*             Net Operating Revenues*      $4,110 million to $4,210 million    $4,200 million to $4,275 million     Adjusted EBITDA(9)                  Adjusted EBITDA(9)        $845 million to $865 million        $865 million to $880 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)             $3.30 to $3.45                     $3.45 to $3.58                  * See page 29 for discussion of the Company’s adoption of a new revenue recognition accounting standard. Encompass Health                                                  28                               Refer to page 105-109 for end notes.
 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)   $      —   $      —   $ 1,079.5  $ 1,056.7  $  2,136.2   $       —  $       —  $ 1,067.7  $ 1,046.0  $  2,113.7           Provision for doubtful accounts             (millions)                              —          —       11.8       10.7         22.5           —                     —          —           —           Inpatient rehabilitation revenue/             discharge                               —          —     18,196     18,297       18,247           —          —     17,987     18,114      18,051           IRF Segment - Prov. for doubtful           accounts as a % of revenue                —%         —%        1.2%       1.1%        1.1%          —          —  N/A           N/A        N/A           Home health revenue/episode               —                 2,982      2,937        2,960           —          —      2,968      2,934       2,952           Adjusted EBITDA (millions)                               No Change                                                No Change           Adjusted EPS                                             No Change                                                No Change    Encompass Health                                                                                                                                                29
 2018 Guidance Considerations         Inpatient Rehabilitation                 Home Health and Hospice  u  Estimated 0.8% increase in Medicare pricing u Estimated 0.5% net Medicare pricing    before reserves related to bad debt for Q3; reduction before reserves related to bad    ~1.2% for Q4                              debt for second half of 2018 u  Salary increase of ~3.0% and benefits    increase of ~8.0% to 12.0% for second half    of 2018                                 u Salary increase of ~3.0% and benefits u  Revenue reserve (formerly bad debt        increase of ~8.0% to 12.0% for second half    expense) of 1.6% to 1.9% of net operating of 2018    revenues* in second half of 2018                                    Consolidated  u  Includes approximately $11 million to $13 million of corporate general and administrative    expenses associated with the rebranding and name change u  Diluted share count of ~99.6 million shares u  Tax rate of ~28% (includes impact from Tax Cuts and Jobs Act) for second half of 2018    Encompass Health * See page 29 for discussion of the Company’s adoption of a new revenue recognition accounting standard. 30
 Adjusted Free Cash Flow(11) Assumptions                                6 Months     Certain Cash Flow Items     2018       2018        2017           (millions)            Actual  Assumptions   Actual   • Cash interest expense     (net of amortization of debt $71.3  $140 to $150  $145.7    discounts and fees)                                             u Increased cash payments for taxes                                                                      in 2018 primarily due to exhaustion                                                                      of the federal NOL in Q1 2017  • Cash payments for taxes, net                                 $51.4   $105 to $135   $94.5    of refunds                                                      u Working capital increase in 2018                                                                      due to expected resumption of                                                                      Medicare pre-payment claims                                                                      denials in second half of 2018  • Working capital and other   $(21.3)   $10 to $30   $(24.1)                                                                    u Maintenance capital expenditures                                                                      in 2018 reflect completion of new                                                                      home office (began occupancy  • Maintenance CAPEX            $72.1   $130 to $150  $138.3         April 2, 2018) and completion of                                                                      the ACE-IT installation (January                                                                      2018), offset by expenditures                                                                      associated with rebranding. • Adjusted Free Cash Flow       $281.4  $400 to $495  $468.7     Encompass Health         Reconciliations to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes. 31
 Uses of Free Cash Flow                                                          6 Months                                                           2018          2018         2017                                                          Actuals    Assumptions     Actuals                      IRF bed expansions                   $9.0       $30 to $40      $25.5                      New IRFs                        - De novos                         32.9        80 to 110       75.2           Growth in    - Acquisitions                       —       opportunistic     10.9              Core      - Replacement IRFs and other        8.7        40 to 50        9.7            Business  Home health and hospice acquisitions                      (includes Camellia in 2018)*         135.8      160 to 185       27.9                                                                     $310 to $385,                       Net redemptions in 2017 exclude               excluding IRF                       ~$276 million associated with the non- $186.4  acquisitions    $149.2                       cash conversion of the Convertible                       Senior Subordinated Notes.(12)             Debt           Reduction  Debt redemptions (borrowings), net  $(58.8)   $ opportunistic   $163.0                        Quarterly cash dividend currently set at                       $0.27 per common share(13)                       Cash dividends on common stock(13)   49.9          ~100          91.5          Shareholder          Distributions Purchase of Home Health Holdings                      rollover shares (see page 63)        65.1          65.1           —                      Common stock repurchases               —       opportunistic     38.1                                                           $56.2         $TBD         $292.6                         ~$250 million authorization as of                               July 24, 2018(14)                    * Net of assumed accounts payable and accrued expenses, the cash paid for the acquisition of Camellia was $129.7 million. Encompass Health                                                                              32                                   See the debt schedule on page 61. Refer to page 105-109 for end notes.
 Rebranding and Name Change   u  The Company’s rebranding and name change reinforce its existing strategy and position as an    integrated provider of inpatient and home-based care.      Effective January 1, 2018, HealthSouth Corporation changed its name to Encompass Health       Corporation, with a corresponding ticker symbol change from “HLS” to “EHC.”      Both business segments — inpatient rehabilitation and home health and hospice — will fully transition       to the Encompass Health branding by the end of the first quarter of 2019.         As of July 1, 2018, approximately 40% of all of the Company’s hospitals and agencies have been          transitioned to the new brand.      Total rebranding investment estimated to be ~$25 million to $30 million, to be incurred between 2017       and 2019                                  2017           2018             2019              Total      Operating expenses*      ~$6 million ~$11 to $13 million ~$1 to $2 million ~$18 to $21 million       Capital expenditures     ~$1 million  ~$5 to $6 million ~$1 to $2 million ~$7 to $9 million       Total rebranding investment ~$7 million ~$16 to $19 million ~$2 to $4 million ~$25 to $30 million    Encompass Health             * Included in corporate general and administrative expenses line item 33
 Business Outlook: 2018 to 2020                2018             2019             2020                   • Implement rebranding and name change                  • Enhance clinical collaboration between the Company’s IRFs and home health locations Key              • Develop and implement post-acute patient navigation tools (e.g., Post-Acute Operational        Innovation Center) Initiatives                  • Refine and expand use of clinical data analytics to further improve patient outcomes                    (e.g., ReAct; Sepsis Alert)                  • Increase participation 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   Encompass Health                                                                              34
 Business Outlook 2018 to 2020: Revenue Assumptions             Volume                          Inpatient Rehabilitation*                            Home Health*     (Includes New Stores)                3+% annual discharge growth                   10+% annual admission growth                                          Approx. 74% of Segment Revenue                 Approx. 86% of Segment Revenue        Medicare Pricing               FY 2018         FY 2019         FY 2020        CY 2018         CY 2019                                                                              (16)                                   CY 2020                                      Q417-Q318       Q418-Q319     Q419-Q320        Q118-Q418      Q119-Q419                (17)                                     Final Rule(15)   Final Rule      Estimate†     Final Rule(15) Proposed Rule   Q120-Q420       Market basket update              1.0%            2.9%           3.0%            1.0%           2.8%            1.5%     Healthcare reform reduction           -           (0.75%)            -               -              -               -      Coding intensity reduction           -              -               -            (0.9%)            -               -      Legislative changes to the        rural add-on program(17)            -              -               -               -            (0.1%)         ~(0.2%)     Change in outlier FDL** ratio         -              -               -               -            0.1%              -         Healthcare reform        productivity adjustment             -            (0.8%)         (0.6%)             -            (0.7%)            -     Net market basket update            1.0%           1.35%           2.4%            0.1%           2.1%            ~1.3%        Change in wage index            ~(0.1%)        ~(0.1%)            -               -              -               - Change in CMG relative weights and    average length of stay values       ~(0.1%)        ~(0.1%)            -               -              -               -     Change in outlier threshold        ~(0.0%)        ~(0.0%)            -               -              -               -            Impact from         case mix re-weighting              -              -               -            ~(0.6%)        ~(0.5%)            -         Estimated impact        to Encompass Health(18)          ~0.8%           ~1.2%                         ~(0.5%)          ~1.6%        Medicare Advantage                     Approx. 19% 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 4.6% of total operating revenues for full-year 2017, are not included in the pricing assumptions.                                                         ** Fixed-dollar loss                                     † 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.    35                                                      Refer to pages 105-109 for end notes.
 Business Outlook 2018 to 2020: Labor and Other Expense Assumptions                  Inpatient Rehabilitation                                Home Health and Hospice                          Salaries and Benefits      2018          2019          2020                         Salary increases         2.75-3.25%    2.75-3.25%   2.75-3.25%                         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 * Guidance consideration of 8-12% on page 30 is for second half of 2018 and is reflective of lower group medical expenses incurred in 2017. 36
 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 35)          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 86).    Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF   #0680), beginning with the FY 2021 IRF QRP.                                               TM          (16) • CMS will begin to publicly displaying data on four assessment-based         FY 2020 FIM      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(16)               length of stay values in the FY                                                                                  2020 IRF-PPS proposed notice of • Beginning October 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     37                                                   Refer to pages 105-109 for end notes.
 HH-PPS Calendar Year 2019 Proposed Rule: Key Provisions          Proposed Rule Update to 2019 Payment Rates                                                                        Company Observations The proposed rule would: •  Implement a net 2.1% market basket increase (2.8% market basket    less a 0.7% 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 ~1.6% for CY 2019                                                                        (see page 35)                New Quality Reporting Measures •  CMS is proposing to remove seven quality reporting measures from the    CY 2021 HH Quality Reporting Program. •  CMS proposes to refine the HH Value-Based Purchasing program by   Quality:    removing two OASIS-based measures, replacing three OASIS-based    • The Company will modify existing    measures with two proposed composite measures, and amending how     processes and systems to meet the    the Total Performance Scores are calculated.                        changed requirements.      Patient-Driven Groupings Model (PDGM) for CY 2020(17) •  The proposed rule presents further refinements to the HH case-mix                                                                      Payment System(17):    methodology for CY 2020 as required by Section 51001 of the BBA of    2018.                                                             • The Company will continue to •  PDGM would 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 •  Relies on payment reductions related to behavioral assumptions to   needed home health services.    achieve budget neutral implementation                          Source: https://www.federalregister.gov/documents/2018/07/12/2018-14443/medicare-and-medicaid-  Encompass Health              programs-cy-2019-home-health-prospective-payment-system-rate-update-and-cy 38                                              Refer to pages 105-109 for end notes.
 Home Health Review Choice Demonstration (“RCD”)*    State            Start Date     Company       Overview                                   Locations   Illinois    Not earlier than 10/1/18 3     Following the pause of the Pre-Claim Review                                              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   Texas         To be determined     52      demonstration states an initial choice of three options.   Florida       To be determined     17                                                 Three options                Preparation                   1. 100% pre-claim review •  Prepared for the initial implementation of 2. 100% postpayment review                                              3. Minimal postpayment review with a 25% payment    PCRD but had not hired additional staff due to reduction for all Medicare home health services    the demonstration's potential delay (believed    staff could be reallocated for a short time until If a provider chooses 100% pre-claim or postpayment                                              review (which applies to every episode of care) and    full-time staff could be hired and trained). reaches a 90% affirmation rate, it may elect to have •  Reviewed all documentation requirements and only 5% of its claims spot checked to ensure continued    workflow                                  compliance. •  Added features in Homecare Homebase    ("HCHB") to minimize the administrative      Timeline    burden and make electronic submission of  The revised demonstration will start no earlier than    data easier                               October 1, 2018 and have a staggered implementation •  Worked with physicians to ensure consistency beginning with home health providers operating in    between their supporting documentation and Illinois, then expanding to Ohio and North Carolina,    the Company's supporting documentation    and later to Texas and Florida. CMS has the option to                                              expand to other states in the Palmetto jurisdiction. •  Have been working with Palmetto (Medicare    Administrative Contractor) to help automate    Duration    its review of submitted records                                              Five years                                   * On May 29, 2018, CMS announced its intention to restart PCRD as RCD.   Encompass Health                                                                              39                               Source: https://www.gpo.gov/fdsys/pkg/FR-2018-05-31/pdf/2018-11492.pdf
 IMPACT Act of 2014 - Enacted October 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(19) and home health agencies.   The precise details of these new reporting requirements, including timing and content, will be developed   and implemented by the Centers for Medicare and Medicaid Services through the regulatory process the   Company expects will take place over the next several years.  ▪ While the Company cannot quantify the potential financial effect of the IMPACT Act on Encompass Health,   the Company believes any post-acute payment system that is data driven and focuses on the needs and   underlying medical conditions of post-acute patients will be positive for providers who offer high-quality,   cost-effective care. Encompass Health believes it is doing just that and expects this act will be positive for   the Company.   ▪ However, it will likely take years for the quality data to be gathered, standardized patient assessment data   to be assembled and disseminated, and potential payment policies to be developed, tested and   promulgated. As the nation’s largest owner and operator of inpatient rehabilitation hospitals, the Company   looks forward to working with HHS, the Medicare Payment Advisory Commission and other healthcare   stakeholders on these initiatives.                                   Source: https://www.govtrack.us/congress/bills/113/hr4994/text  Encompass Health                       Refer to pages 105-109 for end notes.                  40
 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                                               41
 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       * On May 1, 2018, the Company completed the acquisition of Camellia Healthcare for ~$135 million. As a result, the        Company expects to spend approximately $160 million to $185 million on home health and hospice acquisitions in 2018.   Encompass Health                                                                42
 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%                (33.8M)                                       (31.1M)                 Age    2014   2018   2022   2026                    43%      (27.0M)                                 to 2018 to 2022 to 2026 to 2030          41%      (22.8M)         (19.0M)                                              65-69   3.0%   2.7%   1.6%   (0.1)%                                                              70-74   5.1%   3.8%   2.6%   2.1%                                                              75-79   4.1%   5.1%   5.0%   2.1%                                                               80+    1.6%   2.5%   3.6%   5.3%                                                              Total   3.3%   3.4%   3.0%   2.3%                 Age 65-69      Age 70-79     Age 80+   Encompass Health           Source: www.census.gov/data/datasets/2014/demo/popproj/2014-popproj.html 43
 Multi-faceted Inpatient Rehabilitation Growth Strategy                                                                                                                             2017 bed count                                                                                                                            increase                                 New Beds                                                          Total IRFs                                 1,600                                                                     132          •  Gulfport, MS (33 beds)                                                                                                           127                                 1,400                                                                                  •  Westerville, OH (60 beds)                                                                                                           122        De Novos                                 1,200                                                                     117          •  Jackson, TN (48 beds)                                                                                                           112                                 1,000                                                                                                           107          •  Pearland, TX (40 beds)      Acquisitions                 800                                                                     102          •  Bed expansions (166 beds)                                                                                                           97                                   600                                                                                                           92               2018 projected bed                                   400                                                                     87            Bed                                                                                                             count increase                                                                                                           82      Expansions                   200                                                                                  •  Shelby County, AL (34 beds)                                                                                                           77 Wholly  Owned and Joint Ventures                                                                                           – Opened April 2018                                      0                                                                    72                                             2013       2014      2015       2016      2017    Projected                •  Hilton Head, SC (38 beds)                                                                                                  2018    % Increase in licensed beds                          4%        18%        1%        4%         2%                       – Opened June 2018    Total number of licensed beds            6,825     7,095      8,404     8,504*     8,851     9,040†                 •  Murrells Inlet, SC (29 beds)    Total number of IRFs                      103       107        121       123*       127       130†                                                                                                                        •  Winston-Salem, NC (68 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).       † Projected 2018 total number of licensed beds and total number of IRFs include the consolidation of             •  Bed expansions (~100 beds)         the Ft. Worth market (decrease of 60 beds) and the delicensure of 20 SNF beds at a Dallas IRF.  Encompass Health                                                                                                                                                44
 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                                                                    ü     TeamWorks approach to sales and marketing    •   Fair market valuation of contributed assets (joint          ü        ventures only)                                                    Supply chain efficiencies                                                                    ü    •   Partnership complexities                                          Medical leadership and clinical advisory boards                                            Source: MedPAC, Medicare Payment Policy, March 2018 - page 267   Encompass Health                                     CA = confidentiality agreement                                          45
 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%.   • 41 of 42 IRFs are consolidated joint ventures, with one accounted for under the equity method.         42* 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.   Encompass Health      * Excludes IRF joint venture hospitals that have been announced but were not operational as of June 30, 2018: 46                     Murrells Inlet, SC; Winston-Salem, NC; Lubbock, TX; and Boise, ID.
 De Novo IRFs and Acquisitions                                                                           Joint     # of New Beds                                             Location        Operations                                                                Date    Venture?     Investment Considerations                                                    2017   2018  2019 •  IRR objective of 13% (after tax)    De Novo IRFs: •  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                                            Hilton Head, SC    Q2 2018                    38 •  Medicare certification for new hospitals                                          1    (minimum of 30 patients treated for     Winston-Salem, NC  Q4 2018     Yes            68    zero revenue)                         2 Lubbock, TX        Q2 2019     Yes                  40                                          3 Boise, ID          Q3 2019     Yes                  40                                          4 Katy, TX           Q4 2019                          40        Previously Announced IRF    6                                     5        Development Projects Underway       Murrieta, CA       Q4 2019                          50                                        Acquisitions:    3   New States                          Gulfport, MS       Q2 2017     Yes     33          –  Mississippi in 2017                                          6 Murrells Inlet, SC Q3 2018     Yes            29          –  North Carolina in 2018          –  Idaho in 2019              Bed Expansions, net**                      166   ~100  ~100                                                                                   347   ~269  ~270     Encompass Health     * Existing wholly owned, 40-bed IRF in Martin, TN became a joint venture in conjunction with this opening 47                   ** 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          3    returns)                                             Equipment (including CIS)                  3          4 •  Factors that impact costs/timeline:                    Range of a typical 40-50 bed IRF      $22         $28       ◦  CON status                                                       Pre-Opening Expenses(20) (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                                             20 months    Encompass Health                              Refer to pages 105-109 for end notes.                             48
 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                 Altamonte                       Newnan  (12/2014)                Middletown (12/2014)            Franklin (12/2015)                 Springs (10/2014)                 Modesto (10/2016)               Westerville (04/2017)            Pearland (10/2017)              Shelby County (04/2018)                 The Company’s  average 2017 occupancy  Encompass Health                          * IRF EBITDA = earnings before interest, taxes, depreciation, and amortization                     49                                             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 agencies                      • 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                                                                      50
 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     3.2% 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                51                                   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 hospice  Acquisition Strategy for   services from approx. 4,400 providers in 2016.       Hospice • Hospice use among Medicare beneficiaries has grown   • Build additional scale   substantially in recent years, suggesting greater   awareness of and access to hospice services.         • Medicare focus   – In 2016, only 50% of Medicare decedents utilized hospice • Home-based service     services, and of those, more than 25% died in the first seven offering     days of care, even though hospice care is a 180-day benefit. • Since 2000, there has been a substantial increase in the • Strong clinical practice   number of for-profit providers.                       and clean compliance                                                         record         Hospice Providers over Time                     • Highly regarded market                                                         reputation                             487  4,000              510 494                503          526                     558 542             Freestanding   • Attractive geography  3,000     443 578                                      and demographics            704                          Hospital/SNF  2,000 378                              based                             3,369        807     2,844 3,024 3,163                       • Ability to leverage  1,000     2,103                        Home Health     existing infrastructure       1,069                             based    0       2000 2007 2013 2014 2015 2016   Encompass Health    Source: MedPAC, Medicare Payment Policy, March 2018, pages 323, 325, 330 and 333. 52
 Alternative Payment Models   Encompass Health                        53
 Accountable Care Organizations (“ACOs”)         As of                                Medicare Shared Savings Program (MSSP)      January 2018,                        (2018 - 561 ACOs / 10.5 million Medicare beneficiaries)    there were        •  Performance Year 4 (2016) results:                            ◦  241 of 432 ACOs (56%) held spending below their benchmark.        619                       ▪  107 of these ACOs reduced health costs compared to their benchmark, but did not meet      MSSP and                        the minimum savings threshold for shared savings. Next Generation            ◦  191 ACOs (44%) did not reduce costs compared to their benchmark.                            ◦  Shared Savings Program ACOs generated total program savings of $652 million.   ACOs serving       •  A new MSSP model called Track 1+ Model began with 55 ACOs in 2018 and incorporates more limited ~11.9 million           downside risk than Tracks 2 or 3 (two-sided risk models) of the MSSP.       Medicare  and/or Medicaid   beneficiaries.                                        Next Generation ACOs                                        (2018 - 58* ACOs / ~1.4 million Medicare beneficiaries)   Performance        •  Initiative launched in January 2016 for ACOs that are experienced in coordinating care for populations                          of patients   results so far     •  Allows providers to assume higher levels of financial risk and reward than are available under the MSSP     have been        •  Performance Year 1 (2016) results:                            ◦  11 out of 18 ACOs generated savings and received shared savings of $58 million.      mixed.                ◦  Remaining 7 ACOs generated losses and were required to pay back $20 million to CMS.                                             The Company serves as Premier ACO’s exclusive preferred home health provider.                                                  (~22,000 covered lives in northern Texas and southern Oklahoma)                                        Receives increased referrals for Medicare home health patients from the ACO                                        Eligible to receive a portion of the ACO’s shared savings                                        Total shared savings achieved by ACO in 2016 was $12.5 million.                                         - Ranked 2nd in savings rate out of all MSSP ACOs with >20,000 assigned beneficiaries                                         - Met the minimum savings rate 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 54                                     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 December 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 will end on September 30, 2018 and be replaced by the BPCI Advanced model which begins 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. 55                                           The convener and awardee can be, but may not be, the same entity.
 The Company’s Participation in BPCI Model 3                                        Inpatient Rehabilitation                                                        Participating  Bundle Length  % of the Company’s   BPCI Bundle                                              IRFs         (in days)     Total Discharges   Stroke                                                     3             60              0.12%   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            26             90              0.80%   Spinal fusion (non-cervical)                               9            60/90            0.06%   Sepsis                                                    14             90              0.06%   Revision of the hip or knee                               14             90              0.05%   Simple pneumonia and respiratory infections                8             90              0.04%   Major joint replacement of the upper extremity             8            60/90            0.04%   Other respiratory                                         19             90              0.04%   Urinary tract infection                                    6             90              0.04%   Congestive heart failure                                  32             90              0.02%   Chronic obstructive pulmonary disease                     17             90              0.01%   All other episode types                                   51          30/60/90           0.12%     Total                                                  204*                            1.29%                                     Note: Data based on 2016 discharges/episodes  Encompass Health        * Represents a total of 79 locations participating in 204 bundled payment arrangements throughout 2016  56                         As of December 31, 2017, 72 locations were participating in 128 active bundled payment arrangements.
 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 January 1, 2016                          for Performance Year 2018:    and concluding on December 31, 2022.                                                          •  Two process measures from existing Outcome and         Medicare-certified home health agencies             Assessment Information Set (“OASIS”) data collection and           that provide services in the following          states will be required to participate in          three process measures submitted through the HHVBP portal                       the model:                         •  Seven 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                                                          •  CMS is proposing changes to the HHVBP model measurement             3. Iowa                    —                                                             and performance scoring in the CY 2019 proposed rule.             4. Maryland                3             5. Massachusetts           3                                                                               Calendar Year for   Maximum Payment             6. Nebraska                —                  Performance Years  Payment Adjustment   Adjustment (-/+)             7. North Carolina          6                                                                       1st Adjustment    †             8. Tennessee               9                        2016                2018                 3%             9. Washington              —                        2017                2019                 5%                                                                 2018                2020                 6%            Company Locations           43                                                                 2019                2021                 7%   ~22% of the Company’s home health Medicare revenue            2020                2022                 8%                                                           † Majority of Company’s locations in the nine VBP states were acquired in late                                                           2015 or 2016; Company expects impact of ($0.3) million, or a (0.27%) payment                                                           adjustment to Medicare revenue in the nine VBP states, in 2018.                              Source:  https://innovation.cms.gov/initiatives/home-health-value-based-purchasing-model Encompass Health    * Per the CY 2018 HH Final Rule at: https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-23935.pdf 57                                  ** Home Health Care Consumer Assessment of Healthcare Providers and Systems
 Capital Structure                 Encompass Health is positioned with a                cost-efficient, flexible capital structure.   Encompass Health                                               58
 Debt Maturity Profile - Face Value     As of June 30, 2018*                                                                                                            Callable beginning                                                                                                           September 2020    ($ in millions)                                                Callable beginning                                                                    November 2017                          $512                        Available                                                                                               $1,200                                                                 Callable beginning            Senior                                                                    March 2018                 Notes                                                                                               5.75%                   $150 Drawn             Revolver                      + $38               Capacity                   reserved for                                                                                                              $350 Senior                       LC’s                                  $287           $300 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 ~$268 million of capital lease obligations or ~$96 million of other notes payable. Encompass Health                                                                                                             59                                                       See the debt schedule on page 61.
 Financial Leverage and Liquidity                          Total Debt                                                                                  Liquidity                    Leverage Ratio(21)      (billions)                                                                                                      December 31,                        4.6x*                                                        June 30, 2018        2017                                                              Cash Available         $         59.0   $         54.4                                                              Revolver               $        700.0   $       700.0                                                               Less:                                                 3.0x           - Draws                      (150.0)           (95.0)                        3.17                                3.02                            - Letters of Credit           (38.1)           (35.4)       2.8x                                                   Available              $        511.9   $       569.6                                        2.58    2.64                                                              Total Liquidity        $        570.9   $       624.0                2.11                                                                                Credit Ratings         1.52                                                                                        S&P           Moody’s                                                              Corporate Rating          BB-             Ba3                                                                 Outlook               Stable          Stable                                                              Revolver Rating           BB+             Baa3        2013    2014    2015    2016    2017  Trailing        Senior Notes Rating       B+               B1                                              4 Quarters    * 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 93-103.   Encompass Health                 Refer to pages 105-109 for end notes. See also the debt schedule on page 61.   60   (1)
 Debt Schedule                                                                                                      Change in                                                                  June 30,        December 31,         Debt vs.   ($millions)                                                      2018              2017            YE 2017   Advances under $700 million revolving credit facility,      September 2022 - LIBOR +150bps                          $         150.0  $           95.0  $           55.0   Term loan facility, September 2022 - LIBOR +150bps                    287.4             294.7               (7.3)   Bonds Payable:     5.125% Senior Notes due 2023                                        296.3             295.9               0.4     5.75% Senior Notes due 2024                                       1,194.3           1,193.9               0.4     5.75% Senior Notes due 2025                                         344.7             344.4               0.3   Other notes payable                                                    96.3              82.3              14.0   Capital lease obligations                                             267.5             271.5               (4.0)     Long-term debt                                            $       2,636.5  $       2,577.7   $           58.8   Debt to Adjusted EBITDA                                                3.0x              3.1x   Encompass Health                        Reconciliations to GAAP provided on pages 93-103.                       61
 IRF Real Estate Portfolio   128 Inpatient Rehabilitation Hospitals: 8,848 Licensed Beds  4,576 Licensed Beds                                                                             Own ~70% of IRF Real Estate             in CON States                                                                                                                       As of June 30, 2018                                                                                                                  60 Own Building and Land                                                                                                                  29 Own Building Only                                                                                                                 39 Lease Building and Land                                                                                                          4,272 Licensed Beds                                                                                                         in Non-CON States      1 of the 128 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                                                                                                                                                                           62
 Overview of Rollover Shares 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”).      •  Home Health Holdings was capitalized with a promissory note to the parent         company totaling ~$385 million (equal to 5.5x the segment’s 2014 EBITDA).    Home Health         This was done to provide the opportunity for leveraged returns on the equity,   Holdings         thereby mimicking a private equity transaction structure.      •  To the extent Home Health Holdings needs cash (e.g., acquisitions, capex,         etc.), such amounts may be added to the principal amount of the note or via                   Original                                                                                                        Rollover          the creation of new notes. Cash generated from the operations of Home Health                  Shares         Holdings may be used to pay interest and principal on the note(s).                            16.7%      •  In February 2018, each management investor exercised the right to sell 1/3 of         his or her Rollover Shares to EHC, representing ~5.6% of the outstanding         common shares of Holdings. EHC settled the acquisition of those shares upon         payment of ~$65 million, which decreased the ownership interest of the         Rollover Shares to ~11.1%.                       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 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 recent Valuation            transactions, less the current balance of the intracompany note(s) to the parent.                      As of June 30, 2018, the value of the Rollover Shares was ~$195 million.   Encompass Health                                                                                                63
 Information Technology           Encompass Health utilizes information technology to         improve patient care and generate operating efficiencies.   Encompass Health                                               64
 IRF Clinical Information System (“CIS”): 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")                                                                                                                  Quality Reporting               Integrated and                                                                                   •Uniform Data Systems      Bar-coded Point of Care                                                                                   •Clinical Data Warehouse    Medication Administration                                                                                   •Clinical Intelligence                                                                                                                        Discharge Planning              Clinical Notes                                                                                           and Patient Education             • Physician             • Nursing             • Therapy             • Care Mgmt.                                                                            Coordinate Care                                                                           and Engage Patients               Ancillary Services                                               Charge and                                          •Patient History                                      Registration Services                                        •Problems and Diagnoses                                          •Registration                                             •Orders and Results                                         •Census                                                   •Plan of Care                                         •Coding                                                   •Workflow Alerts and Reminders                                         •Billing                                                  •Treatment and Interventions   Encompass Health                                                                                                                             65
 IRF Proprietary Management System: Beacon   Encompass Health                                   66
 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                                                                                                67
 Operational Metrics   Encompass Health                        68
 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             by the number of occupied beds during each   48.5    48.6    50.2    50.4            50.2                                                    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    21.0                 Salaries and Benefits                          IRF-Related Expenses     2013        2014        2015        2016        2017          YTD       2013        2014        2015        2016        2017         YTD                                              2018                                                            2018   3.44    3.40    3.41    3.44    3.47    3.38                      EPOB   Encompass Health                                                                              69
 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.                                                                        Q2 2018     $1.8         $(2.8)        $0.5         $—   –  Encompass Health’s investment in clinical information systems and its      medical services department has further improved its documentation Q1 2018     3.1         (6.8)         0.9          —      and reduced technical denials.                                    Q4 2017      0.7         (7.8)         0.2          — • By statute, ALJ decisions are due within 90 days of a request for hearing, Q3 2017 7.4        (6.2)         2.2          —   but appeals are taking years. HHS has implemented rule changes to    Q2 2017     16.5         (7.7)         4.9          —   address the backlog of appeals, but their effect is uncertain.       Q1 2017     19.0         (5.9)         5.7          — • In 2016, a federal court ordered HHS to eliminate the backlog by the end Q4 2016 17.8         (4.4)         5.4          0.5   of CY 2020. HHS continues to object that it cannot clear the backlog in Q3 2016  15.7         (8.5)         4.6          —   the timeframe established by the court. Although HHS remains bound by Q2 2016    18.7         (4.9)         4.6          —   the order, the courts are considering how HHS will comply.                                                                        Q1 2016     22.7         (8.4)         6.0          — • All Medicare providers continue to experience delays resulting in a  Q4 2015     22.5         (4.1)         5.6         (1.3)   growing backlog.                                                     Q3 2015     22.0         (4.1)         5.9         (1.1)   –  Currently, ALJs are hearing Encompass Health appeals from claims  Q2 2015     18.2         (3.8)         4.9          —      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-                              June 30,  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   $   159.8 $    164.0 $  159.7 • Effective February 2018, Palmetto GBA assumed responsibilities for   Cahaba’s MAC jurisdiction. See announcement from CMS at https://     Recorded reserves                 (47.9)    (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 $   111.9 $   114.8 $   111.8   Encompass Health                                                                                                             70
 Inpatient Rehabilitation Operational and Labor Metrics                                                              Q2         Q1          Q4           Q3           Q2          Q1         Full Year                                                            2018      2018         2017         2017        2017         2017          2017                                                                                              (In Millions)   Net patient revenue-inpatient                        $   809.6  $   817.1   $     776.9  $    758.2  $     751.5  $    752.7   $   3,039.3   Net patient revenue-outpatient and other    revenues                                                 25.0       23.2          25.5        25.3         26.1        25.1         102.0    Net operating revenues*                              $   834.6  $   840.3   $     802.4  $    783.5  $     777.6  $    777.8   $   3,141.3                                           xxx-xxx                                          (Actual Amounts)               (22)   Discharges                                              45,010     45,108        43,910      42,948       42,805      42,259       171,922   Net patient revenue per discharge*                   $  17,987  $  18,114   $    17,693  $   17,654  $    17,556  $   17,812   $    17,678    Outpatient visits                                      131,041    127,308      131,787      138,689      153,415     152,454       576,345    Average length of stay                                    12.5       12.7          12.6        12.8         12.7        12.9          12.7    Occupancy %                                               70.1%      71.9%         67.7%       68.2%        69.3%       71.0%         67.8%    # of licensed beds                                       8,848      8,831         8,851       8,748        8,641       8,528         8,851    Occupied beds                                            6,202      6,349         5,992       5,966        5,988       6,055         6,001                                   (23)   Full-time equivalents (FTEs)                            21,010     20,978        20,739      20,740       20,474      20,254        20,552    Contract labor                                             248        285          255          235          251         260           250    Total FTE and contract labor                            21,258     21,263        20,994      20,975       20,725      20,514        20,802         (24)   EPOB                                                      3.43       3.35          3.50        3.52         3.46        3.39          3.47                                 * See page 29 for discussion of the Company’s adoption of a new revenue recognition accounting standard. Encompass Health                                           Refer to pages 105-109 for end notes.                                             71
 Home Health and Hospice Operational Metrics                                                             Q2           Q1           Q4           Q3          Q2           Q1        Full Year                                                           2018         2018         2017         2017        2017         2017         2017                                                                                               (In Millions)   Net home health revenue                              $     204.8  $     185.3  $     186.3  $     180.3 $     171.9  $     163.9  $     702.4  Net hospice revenue                                         28.3         20.4         20.1         17.8        16.9         15.4         70.2   Net operating revenues*                              $     233.1  $     205.7  $     206.4  $     198.1 $     188.8  $     179.3  $     772.6   Home Health:                                                                             (Actual Amounts)   Admissions(25)                                            34,026       33,855       31,766      31,471       30,823      30,810       124,870   Recertifications                                          28,089       25,229       25,479      24,396       22,568      20,546        92,989   Episodes                                                  61,238       56,658       56,625      53,757       52,101      49,260       211,743  Average revenue per episode*                         $     2,968  $     2,934  $     2,976  $     3,008 $     2,975  $     2,978  $     2,984   Episodic visits per episode                                 17.5         17.9         17.3         17.7        18.1         18.7         17.9   Total visits                                           1,240,490    1,174,950    1,124,268   1,101,109    1,095,225   1,070,356     4,390,958   Cost per visit                                       $        76  $        75  $        77  $       76  $        73  $       75   $        75  Hospice:   Admissions(26)                                             1,797        1,593        1,355        1,273       1,114        1,128        4,870   Patient days                                             192,404     143,231       134,113     123,491      113,028     108,717       479,350   Revenue per day*                                     $       148  $       142  $       150  $      145  $       149  $      141   $       146                                   * See page 29 for discussion of the Company’s adoption of a new revenue recognition accounting standard. Encompass Health                                             Refer to pages 105-109 for end notes.                                           72
 Payment Sources (Percent of Revenues)                                          Inpatient                                       Rehabilitation      Home Health and                Consolidated                                          Segment          Hospice Segment                                              Q2                    Q2                     Q2            Full Year                                       2018        2017       2018       2017       2018       2017       2017    Medicare                              72.8%      73.2%      85.5%      85.5%      75.5%       75.6%      76.0%    Medicare Advantage                     9.4%       8.6%       9.3%      10.1%        9.4%       8.9%       8.6%    Managed care                          10.4%      11.0%       3.7%       3.5%        8.9%       9.5%       9.3%    Medicaid                               3.2%       3.0%       1.2%       0.7%        2.8%       2.5%       2.5%    Other third-party payors               1.5%       1.6%         —%         —%        1.2%       1.3%       1.3%    Workers’ compensation                  0.8%       0.8%       0.1%         —%        0.7%       0.7%       0.7%    Patients                               0.5%       0.5%       0.1%       0.1%        0.4%       0.4%       0.5%    Other income                           1.4%       1.3%       0.1%       0.1%        1.1%       1.1%       1.1%      Total                              100.0%     100.0%     100.0%     100.0%     100.0%      100.0%     100.0%   Encompass Health                                                                                                73
 Industry Structure   Encompass Health                                                                                                                             74
 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 75                                    * 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            76
 Continuum of Healthcare Services   Preventive  Routine health care                                          Post-Acute                      Ambulatory           Acute (screenings, check-                                          Medical care         Palliative                      Medical care         Medical ups, patient                                                 provided after a     Medical care                       delivered on an      treatment of counseling) to                                               period of acute      that is focused                      outpatient basis     diseases for prevent illnesses,                                           care (long-term      on providing                      (blood tests, X-     which a patient disease, or other                                            acute care,          relief from the                      rays, endoscopy,     is treated for a health problems.                                             inpatient            symptoms and                      certain biopsies,    brief but severe                                                              rehabilitation,      stress of a Home health and      certain surgical                                           episode of         skilled nursing,     serious illness care management      procedures)          illness                                 (hospice) services to prevent                                          home health) or reduce acute admissions.   Encompass Health                                                                                      77
 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,   78                                     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;          79                                         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       80
 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               81
 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              82
 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                   83
 “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                                                                              84
 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                                                                              85
 Inpatient Rehabilitation Outlier Payments(7)                                    # of IRFs                        Total Outlier Payments                     Avg Outlier Payment per Discharge                                                                       Non-                                                    Non-                                    Non-              IRF       Encompass Encompass           Encompass     Encompass                                 Encompass     Encompass            Deciles      Health    Health   Total       Health         Health           Total         %         Health         Health      Total            90-100             —       112     112   $         —  $   134,977,428 $   134,977,428   52.7%         N/A       $      3,072 $  3,072             80-90             2       110     112   $    705,836 $    46,878,724 $    47,584,560   18.6%    $       1,373  $      1,316 $  1,317             70-80             1       112     113   $    237,706 $    27,515,884 $    27,753,590   10.8%    $         113  $       895  $    845             60-70             5       108     113   $    815,666 $    16,985,379 $    17,801,045     7.0%   $         170  $       525  $    480             50-60             7       106     113   $    715,301 $    10,810,889 $    11,526,190     4.5%   $          96  $       416  $    345             40-50             9       104     113   $    546,134 $     6,900,730 $     7,446,864     2.9%   $          54  $       274  $    212             30-40            19        94     113   $    810,929 $     3,917,683 $     4,728,612     1.9%   $          45  $       144  $    105             20-30            29        84     113   $    755,957 $     2,168,627 $     2,924,584     1.1%   $          31  $       113  $     67             10-20            27        85     112   $    308,975 $       871,995 $     1,180,970     0.5%   $          12  $        42  $     26       More Efficient Less 0-10 27       85     112   $     39,483 $        61,960 $       101,443      —%    $           1  $          3 $      2              Totals          126     1,000   1,126   $  4,935,987 $   251,089,299 $   256,025,286  100.0%           Outlier Observations:          •  10% of IRFs receive 53% of the outlier payments; none of the 10% are Encompass Health IRFs.           •  The Company receives 1.9% of the IRF outlier payments despite treating approx. 30% of the             Medicare patients/discharges.          •  As a result of outlier payments, CMS pays the Company approx. $845 less per discharge than other             providers.          •  Capping the IRF industry outlier payments at 10% of each IRF’s total Medicare payments could save             Medicare approx. $651 million over 10 years.  Encompass Health                                         Refer to pages 105-109 for end notes.                                               86
 Segment Operating Results   Encompass Health                        87
 Inpatient Rehabilitation Segment Adjusted EBITDA                                                 Q2          Q1          Q4          Q3         Q2          Q1        Full Year      (In Millions)                            2018        2018        2017        2017       2017        2017        2017      Net operating revenues:       Inpatient                            $    809.6  $    817.1  $    776.9  $    758.2 $    751.5  $    752.7      3,039.3       Outpatient and other                       25.0        23.2        25.5        25.3       26.1        25.1       102.0          Total segment revenue*                 834.6       840.3       802.4       783.5      777.6       777.8      3,141.3      Operating expenses:        Salaries and benefits                   (416.5)     (424.2)     (408.1)     (403.2)    (394.3)     (398.2)    (1,603.8)                               % of revenue       49.9%       50.5%       50.9%       51.5%      50.7%       51.2%       51.1%        Other operating expenses(a)             (126.9)     (122.9)     (120.4)     (117.4)    (112.9)     (111.8)      (462.5)        Supplies                                 (34.7)      (35.9)      (35.1)      (33.1)      (33.8)     (33.7)      (135.7)        Occupancy costs                          (16.0)      (15.5)      (15.6)      (15.7)      (15.5)     (15.1)       (61.9)                                                (177.6)     (174.3)     (171.1)     (166.2)    (162.2)     (160.6)      (660.1)                               % of revenue       21.3%       20.7%       21.3%       21.2%      20.9%       20.6%       21.0%      Equity in nonconsolidated affiliates         1.6         2.0         1.7         1.9        1.8         1.9         7.3      Other income(b)                              1.2         0.5         1.2         1.0        0.9         1.0         4.1      Noncontrolling interests(c)                (19.8)      (20.5)      (19.0)      (16.7)      (15.4)     (16.5)       (67.6)      Segment Adjusted EBITDA               $   223.5   $   223.8   $   207.1   $   200.3  $    208.4  $   205.4   $    821.2       In arriving at Adjusted EBITDA, the      following was excluded:  (a) Loss (gain) on disposal of assets     $      2.4  $      0.8  $      1.3  $      3.1 $      0.8  $     (0.4) $      4.8  (b) Change in fair market value of equity        securities(27)                      $      0.4  $      0.6  $       —   $       —  $        —  $       —   $        —  (c) Tax reform impact on noncontrolling      interests(28)                         $       —   $       —   $      0.5  $       —  $        —  $       —   $      0.5                                       Reconciliations to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes. Encompass Health                                                                                                             88                              * See page 29 for discussion of the Company’s adoption of a new revenue recognition accounting standard.
 Home Health and Hospice Segment Adjusted EBITDA                                                   Q2          Q1           Q4          Q3          Q2         Q1        Full Year     (In Millions)                               2018        2018         2017        2017        2017       2017         2017     Net operating revenues:      Home health revenue                     $    204.8  $    185.3   $    186.3  $    180.3  $    171.9 $    163.9   $    702.4      Hospice revenue                               28.3        20.4         20.1        17.8        16.9       15.4         70.2        Total segment revenue*                     233.1       205.7        206.4       198.1       188.8      179.3        772.6     Operating expenses(a)      Cost of services                             (109.1)      (98.6)      (96.0)      (92.1)      (87.5)      (87.7)     (363.3)                                  % of revenue      46.8%       47.9%        46.5%       46.5%       46.3%      48.9%        47.0%      Support and overhead costs                    (80.8)      (72.0)      (73.8)      (68.9)      (67.7)      (66.8)     (277.2)                                  % of revenue      34.7%       35.0%        35.8%       34.8%       35.9%      37.3%        35.9%                                                   (189.9)     (170.6)     (169.8)     (161.0)     (155.2)     (154.5)     (640.5)                                  % of revenue      81.5%       82.9%        82.3%       81.3%       82.2%      86.2%        82.9%     Other income                                     0.5          —           —           —           —           —            —     Equity in net income of nonconsolidated      affiliates                                      0.4        0.3          0.1         0.2         0.2         0.2         0.7     Noncontrolling interests(b)                     (2.5)       (1.9)       (2.3)       (2.5)       (1.0)       (1.1)       (6.9)     Segment Adjusted EBITDA                  $     41.6  $     33.5   $     34.4  $    34.8   $    32.8  $     23.9   $    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(29)            $      (0.9) $     (1.0) $       —   $       —   $       —  $        —   $        — (b) Tax reform impact on noncontrolling      interests(28)                           $        —  $        —   $      4.1  $       —   $       —  $        —   $      4.1                                        Reconciliations to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes.  Encompass Health                                                                                                             89                               * See page 29 for discussion of the Company’s adoption of a new revenue recognition accounting standard.
 Segment Operating Results                                                               Q2 2018                                                Q2 2017                                                        Home                                                   Home                                                     Health and                                              Health and (In Millions)                              IRF        Hospice     Reclasses   Consolidated         IRF       Hospice      Reclasses   Consolidated Net operating revenues                 $     834.6  $     233.1  $         —  $     1,067.7   $      777.6 $      188.8 $          —  $       966.4 Operating Expenses:     Inpatient Rehabilitation:       Salaries and benefits                 (416.5)           —       (161.7)        (578.2)        (394.3)           —       (133.5)        (527.8)       Other operating expenses(a)           (126.9)           —         (20.1)       (147.0)        (112.9)           —        (15.6)        (128.5)       Supplies                               (34.7)           —          (4.6)        (39.3)         (33.8)           —         (3.3)         (37.1)       Occupancy                              (16.0)           —          (3.5)        (19.5)         (15.5)           —         (2.8)         (18.3)     Home Health and Hospice:       Cost of services sold (excluding         depreciation and amortization)           —       (109.1)       109.1             —              —         (87.5)        87.5             —       Support and overhead costs                 —        (80.8)        80.8             —              —         (67.7)        67.7             —                                             (594.1)      (189.9)           —         (784.0)        (556.5)      (155.2)           —         (711.7) Other income(b)                                1.2          0.5            —            1.7            0.9            —            —            0.9 Equity in net income of nonconsolidated   affiliates                                   1.6          0.4            —            2.0            1.8          0.2            —            2.0 Noncontrolling interests(c)                  (19.8)         (2.5)          —          (22.3)         (15.4)        (1.0)           —          (16.4)     Segment Adjusted EBITDA            $    223.5   $      41.6  $         —         265.1    $     208.4  $       32.8 $          —         241.2 General and administrative expenses(d)                                                (33.5)                                                  (31.7)     Adjusted EBITDA                                                           $      231.6                                            $      209.5    In arriving at Adjusted EBITDA, the following were excluded: (a) Loss on disposal of assets         $       2.4  $         —  $         —  $         2.4   $        0.8 $          — $          —  $         0.8 (b) Change in fair market value of     $       0.4  $         —  $         —  $         0.4   $         —  $          — $          —  $          —       equity securities(27) (c) SARs mark-to-market impact on      $         —  $       (0.9) $        —  $        (0.9)  $         —  $          — $          —  $          —       noncontrolling interests(29) (d) Stock-based compensation           $         —  $         —  $         —  $        21.4   $         —  $          — $          —  $        20.7     Encompass Health                       Reconciliations to GAAP provided on pages 93-103; Refer to pages 105-109 for end notes.               90
 Segment Operating Results                                                   Six Months Ended June 30, 2018                          Six Months Ended June 30, 2017                                                        Home                                                   Home                                                     Health and                                              Health and (In Millions)                              IRF        Hospice     Reclasses   Consolidated         IRF       Hospice      Reclasses   Consolidated Net operating revenues                 $   1,674.9  $     438.8  $         —  $     2,113.7   $    1,555.4 $      368.1 $          —  $     1,923.5 Operating Expenses:     Inpatient Rehabilitation:       Salaries and benefits                 (840.7)           —       (307.7)      (1,148.4)        (792.5)           —       (265.4)      (1,057.9)       Other operating expenses(a)           (249.8)           —         (37.6)       (287.4)        (224.7)           —        (32.1)        (256.8)       Supplies                               (70.6)           —          (8.6)        (79.2)         (67.5)           —         (6.6)         (74.1)       Occupancy                              (31.5)           —          (6.6)        (38.1)         (30.6)           —         (5.6)         (36.2)     Home Health and Hospice:       Cost of services sold (excluding         depreciation and amortization)           —       (207.7)       207.7             —              —        (175.2)       175.2             —       Support and overhead costs                 —       (152.8)       152.8             —              —        (134.5)       134.5             —                                           (1,192.6)      (360.5)           —       (1,553.1)      (1,115.3)      (309.7)           —       (1,425.0) Other income(b)                                1.7          0.5            —            2.2            1.9            —            —            1.9 Equity in net income of nonconsolidated   affiliates                                   3.6          0.7            —            4.3            3.7          0.4            —            4.1 Noncontrolling interests(c)                  (40.3)         (4.4)          —          (44.7)         (31.9)        (2.1)           —          (34.0)     Segment Adjusted EBITDA            $    447.3   $      75.1  $         —         522.4    $     413.8  $       56.7 $          —         470.5 General and administrative expenses(d)(e)                                             (67.5)                                                  (60.2)     Adjusted EBITDA                                                           $      454.9                                            $      410.3    In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets  $       3.2  $         —  $         —  $         3.2   $        0.4 $       (0.1) $         —  $         0.3 (b) Change in fair market value of     $       1.0  $         —  $         —  $         1.0   $         —  $          — $          —  $          —       equity securities(27) (c) SARs mark-to-market impact on      $         —  $       (1.9) $        —  $        (1.9)  $         —  $          — $          —  $          —       noncontrolling interests(29) (d) Stock-based compensation           $         —  $         —  $         —  $        47.5   $         —  $          — $          —  $        28.7 (e) Transaction costs                  $         —  $         —  $         —  $         1.0   $         —  $          — $          —  $          —     Encompass Health                       Reconciliations to GAAP provided on pages 93-103; Refer to pages 105-109 for end notes.               91
 Segment Operating Results                                                                                                Year Ended December 31, 2017                                                                                                   Home                                                                                                Health and          (In Millions)                                                                IRF        Hospice     Reclasses   Consolidated          Net operating revenues                                                  $    3,141.3  $     772.6  $         —  $     3,913.9          Operating Expenses:               Inpatient Rehabilitation:                Salaries and benefits                                                  (1,603.8)          —        (550.8)     (2,154.6)                Other operating expenses(a)                                              (462.5)          —         (64.5)       (527.0)                Supplies                                                                 (135.7)          —         (13.6)       (149.3)                Occupancy                                                                 (61.9)          —         (11.6)        (73.5)               Home Health and Hospice:                Cost of services sold (excluding depreciation and amortization)              —        (363.3)       363.3             —                Support and overhead costs                                                   —        (277.2)       277.2             —                                                                                       (2,263.9)      (640.5)          —       (2,904.4)          Other income                                                                     4.1            —            —            4.1          Equity in net income of nonconsolidated affiliates                               7.3           0.7           —            8.0          Noncontrolling interest(b)                                                      (67.6)        (6.9)          —          (74.5)               Segment Adjusted EBITDA                                            $      821.2  $     125.9  $         —          947.1          General and administrative expenses(c)                                                                                 (124.0)               Adjusted EBITDA                                                                                            $       823.1             In arriving at Adjusted EBITDA, the following were excluded:          (a)  Loss (gain) on disposal of assets                                  $        4.8  $       (0.2) $        —  $         4.6                                                         (28)          (b)  Tax reform impact on noncontrolling interests                      $        0.5  $        4.1 $         —  $         4.6          (c)  Stock-based compensation                                           $          —  $         —  $         —  $        47.7   Encompass Health                       Reconciliations to GAAP provided on pages 93-103; Refer to pages 105-109 for end notes.               92
 Reconciliations to GAAP            and Share Information   Encompass Health                        93
 Reconciliation of Net Income to Adjusted EBITDA(9)                                                                                                            2018                                                                                      Q1                      Q2                6 Months  (in millions, except per share data)                                         Total     Per Share      Total   Per Share    Total    Per Share  Net Income                                                                $    105.2               $   113.2             $   218.4  Loss (income) from disc ops, net of tax, attributable to Encompass Health         0.5                    (0.2)                 0.3  Net income attributable to noncontrolling interests                             (21.4)                  (21.4)               (42.8)  Income from continuing operations attributable to Encompass Health*              84.3 $      0.85       91.6  $    0.92      175.9 $    1.76  Provision for income tax expense                                                 30.0                   29.3                  59.3  Interest expense and amortization of debt discounts and fees                     35.6                   37.7                  73.3  Depreciation and amortization                                                    45.9                   49.7                  95.6  Net noncash loss on disposal of assets                                            0.8                    2.4                   3.2  Stock-based compensation expense                                                 26.1                   21.4                  47.5  Transaction costs                                                                 1.0                      —                   1.0  SARs mark-to-market impact on noncontrolling interests(29)                       (1.0)                   (0.9)                (1.9)  Change in fair market value of equity securities(27)                              0.6                    0.4                   1.0  Adjusted EBITDA                                                           $    223.3               $   231.6             $   454.9   Weighted average common shares outstanding:  Basic                                                                                        97.8                  97.9                 97.9  Diluted                                                                                      99.4                  99.6                 99.6                                * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Encompass Health                                                                                                                             94                                                          Refer to pages 105-109 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            $   86.5           $  335.4 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      60.8 $   0.61     256.7 $   2.69 Provision for income tax expense                     39.7               28.6               43.1                49.2              160.6 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(30)                —               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(28)       —                  —                  —                 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                                                                                                                             95                                                          Refer to pages 105-109 for end notes.
 Reconciliation of Segment Adjusted EBITDA to Income    from Continuing Operations Before Income Tax Expense                                                                     Three Months Ended      Six Months Ended      Year Ended                                                                          June 30,              June 30,         December 31,                                                                       2018       2017       2018       2017          2017                                                                                             (In Millions)   Total segment Adjusted EBITDA                                     $  265.1   $   241.2  $   522.4  $   470.5  $       947.1   General and administrative expenses                                   (54.9)     (52.4)    (116.0)      (88.9)        (171.7)   Depreciation and amortization                                         (49.7)     (45.8)      (95.6)     (91.0)        (183.8)   Loss on disposal of assets                                             (2.4)      (0.8)       (3.2)      (0.3)          (4.6)   Loss on early extinguishment of debt                                     —       (10.4)         —       (10.4)         (10.7)   Interest expense and amortization of debt discounts and fees          (37.7)     (40.4)      (73.3)     (81.7)        (154.4)   Net income attributable to noncontrolling interests                    21.4       16.4       42.8       34.0            79.1   SARs mark-to-market impact on noncontrolling interests(29)              0.9          —        1.9          —              —   Change in fair market value of equity securities(27)                   (0.4)         —        (1.0)        —              —   Tax reform impact on noncontrolling interests(28)                        —           —          —          —            (4.6)      Income from continuing operations before income tax expense    $  142.3   $   107.8  $   278.0  $   232.2  $       496.4   Encompass Health                                 Refer to pages 105-109 for end notes.                                       96
 Adjusted EPS(10) - Q2 2018                                                                           For the Three Months Ended June 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(27) 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(29)         0.9              (0.9)           —             —          — Change in fair market value of equity securities(27)              (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 93-103. Refer to pages 105-109 for end notes.       97                                             * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - Q2 2017                                                                         For the Three Months Ended June 30, 2017                                                                                       Adjustments                                                                                 Mark-to-                                                                                  Market                                                                               Adjustment                                                                                 on Stock                                                                      As      Compensation     Income Tax        As                                                                  Reported       Expense       Adjustments    Adjusted                                                                          (In Millions, Except Per Share Amounts)       Adjusted EBITDA                                           $    209.5   $           —   $           —  $    209.5       Depreciation and amortization                                   (45.8)             —               —        (45.8)       Loss on early extinguishment of debt                            (10.4)             —               —        (10.4)       Interest expense and amortization of debt discounts and fees    (40.4)             —               —        (40.4)       Stock-based compensation                                        (20.7)           11.6              —         (9.1)       Loss on disposal of assets                                       (0.8)             —               —         (0.8)          Income from continuing operations before income tax            expense                                                     91.4            11.6              —       103.0       Provision for income tax expense                                (28.6)           (4.6)           (7.4)      (40.6)          Income from continuing operations attributable to            Encompass Health                                     $      62.8  $         7.0   $        (7.4) $     62.4          Add: Interest on convertible debt, net of tax(12)              8.3                                        8.3          Numerator for diluted earnings per share               $      71.1                                 $     70.7       Diluated earnings per share from continuing operations    $      0.72          Impact of antidilution                                 $     (0.02)       Diluted earnings per share from continuing operations, as         reported*                                               $      0.70  $        0.07   $       (0.07) $     0.71       Diluted shares used in calculation                               98.9   Encompass Health                Reconciliation to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes.       98                                             * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - YTD 2018                                                                       For the Six Months Ended June 30, 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(27) Adjusted                                                                       (In Millions, Except Per Share Amounts) Adjusted EBITDA                                  $   454.9  $             —   $         —   $        —   $          —  $   454.9 Depreciation and amortization                         (95.6)              —             —            —              —       (95.6) Interest expense and amortization of debt discounts  and fees                                             (73.3)              —             —            —              —       (73.3) Stock-based compensation                              (47.5)            22.4            —            —              —       (25.1) Loss on disposal of assets                             (3.2)              —             —            —              —        (3.2) Transaction costs                                      (1.0)              —             —           1.0             —          — SARs mark-to-market impact on noncontrolling  interests(29)                                         1.9              (1.9)           —            —              —          — Change in fair market value of equity securities(27)   (1.0)              —             —            —            1.0          —    Income from continuing operations before      income tax expense                              235.2              20.5            —           1.0           1.0      257.7 Provision for income tax expense                      (59.3)            (5.7)         (0.7)        (0.3)          (0.3)     (66.3)    Income from continuing operations      attributable to Encompass Health            $   175.9  $          14.8   $       (0.7) $       0.7  $        0.7  $   191.4    Add: Interest, amortization, and loss on      extinguishment of convertible debt, net of tax      —                                                                     —    Numerator for diluted earnings per share      $   175.9                                                             $   191.4 Diluted earnings per share from continuing  operations, as reported*                        $    1.76  $          0.15   $      (0.01) $      0.01  $       0.01  $    1.92 Diluted shares used in calculation                    99.6    Encompass Health                Reconciliation to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes.       99                                              * Adjusted EPS may not sum across due to rounding.
 Adjusted EPS(10) - YTD 2017                                                                            For the Six Months Ended June 30, 2017                                                                                        Adjustments                                                                               Mark-to-Market                                                                               Adjustment for                                                                                    Stock                                                                       As       Compensation     Income Tax       As                                                                    Reported       Expense      Adjustments    Adjusted                                                                           (In Millions, Except Per Share Amounts)         Adjusted EBITDA                                           $   410.3   $             —  $          —  $   410.3         Depreciation and amortization                                  (91.0)               —             —       (91.0)         Loss on early extinguishment of debt(30)                       (10.4)               —             —       (10.4)         Interest expense and amortization of debt discounts and fees   (81.7)               —             —       (81.7)         Stock-based compensation                                       (28.7)            14.9             —       (13.8)         Loss on disposal of assets                                      (0.3)               —             —        (0.3)            Income from continuing operations before income tax              expense                                                   198.2             14.9             —       213.1         Provision for income tax expense                               (68.3)             (6.0)        (10.0)     (84.3)            Income from continuing operations attributable to              Encompass Health                                     $   129.9   $           8.9  $      (10.0) $   128.8            Add: Interest, amortization, and loss on extinguishment of              convertible debt, net of tax                               10.8                                       10.8            Numerator for diluted earnings per share               $   140.7                                  $   139.6         Diluted earnings per share from continuing operations, as          reported*                                                $     1.42  $          0.09  $      (0.10) $    1.41         Diluted shares used in calculation                              99.0   Encompass Health                Reconciliation to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes.      100                                             * 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      Appreciation    Tax Reform    Extinguishment     Income Tax        As                                                Reported      Rights(29)    Impact(28)       of Debt(30)   Adjustments(31)  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(30)            (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(28)    (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                   (160.6)         (5.3)            1.2             (0.1)            (7.7)    (172.5)     Income from continuing operations      attributable to Encompass Health          $   256.7  $         8.0  $          5.8  $           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   $   267.5                                                                  $   273.8 Diluted earnings per share from continuing   operations, as reported*                     $    2.69  $        0.08  $        0.06   $            —   $        (0.08) $    2.76 Diluted shares used in calculation                  99.3      Encompass Health                Reconciliation to GAAP provided on pages 93-103. Refer to pages 105-109 for end notes.      101                                                * Adjusted EPS may not sum across due to rounding.
 Adjusted Free Cash Flow History(11)                                                                    Q2                   6 Months                Full Year   (Millions)                                             2018         2017        2018        2017        2017        2016    Net cash provided by operating activities           $     169.2  $     151.2  $   385.5  $    332.0  $     658.3  $   634.4    Impact of discontinued operations                          (0.1)         0.2         0.6        0.6          0.6         0.7   Net cash provided by operating activities of     continuing operations                                   169.1        151.4      386.1       332.6        658.9      635.1    Capital expenditures for maintenance                      (36.0)       (32.3)      (72.1)     (54.5)      (138.3)     (104.2)   Distributions paid to noncontrolling interests of     consolidated affiliates                                 (19.8)       (12.6)      (35.2)     (24.1)       (51.9)      (64.9)   Items non-indicative of ongoing operating     performance:   Cash paid for professional fees — accounting, tax,     and legal                                                  —            —           —          —            —          1.9    Transaction costs and related assumed liabilities          (2.1)          —         (1.7)        —            —          0.8    Net premium on bond issuance/repayment                       —            —           —          —            —          5.8    Cash paid for SARs exercise                                  —            —          4.3         —            —           —    Adjusted free cash flow                             $    111.2   $    106.5   $   281.4  $   254.0   $    468.7   $   474.5    Cash dividends on common stock(13)                  $      24.5  $      21.3  $    49.9  $     43.5  $      91.5  $    83.8               Information regarding investing and financing categories of the statement of cash flows for the periods presented can be found on              Encompass Health’s website in the Earnings Releases for those periods.   Encompass Health                                 Refer to pages 105-109 for end notes.                                      102
 Net Cash Provided by Operating Activities Reconciled        to Adjusted EBITDA                                                    Q2              6 Months                          Full Year (Millions)                                   2018      2017     2018     2017      2017      2016      2015      2014      2013 Net cash provided by operating activities  $  169.2  $  151.2  $ 385.5  $ 332.0  $  658.3  $  640.2  $  505.9  $  458.9  $  477.8 Professional fees — accounting, tax, and legal    —         —        —        —         —       1.9       3.0       9.3       9.5 Interest expense and amortization of debt  discounts and fees                            37.7      40.4     73.3     81.7     154.4     172.1     142.9     109.2     100.4 Equity in net income of nonconsolidated  affiliates                                     2.0       2.0      4.3      4.1       8.0       9.8       8.7      10.7      11.2 Net income attributable to noncontrolling  interests in continuing operations           (21.4)    (16.4)   (42.8)   (34.0)    (79.1)    (70.5)    (69.7)    (59.7)    (57.8) Amortization of debt-related items             (1.0)     (3.2)    (2.0)     (6.7)     (8.7)   (13.8)    (14.3)    (12.7)      (5.0) Distributions from nonconsolidated affiliates  (2.3)     (2.3)    (3.5)     (4.4)     (8.6)     (8.5)     (7.7)   (12.6)    (11.4) Current portion of income tax expense          29.9      33.4     62.9     24.1      85.0      31.0      14.8      13.3       6.3 Change in assets and liabilities               18.4       4.1    (22.3)    12.3       7.4      30.1      82.7      48.8      17.1 Tax reform impact on noncontrolling interests  (28)                                             —         —        —        —       4.6         —         —         —         — Cash (provided by) used in operating  activities of discontinued operations         (0.1)      0.2      0.6      0.6       0.6       0.7       0.7       1.2       1.9 Transaction costs                                 —         —      1.0        —         —         —      12.3       9.3         — SARS mark-to-market impact on  noncontrolling interests(29)                  (0.9)        —     (1.9)       —         —         —         —         —         — Change in fair market value of equity  securities(27)                                 0.4         —      1.0        —         —         —         —         —         — Other                                          (0.3)      0.1     (1.2)     0.6       1.2       0.6       3.2       1.9       1.6   Adjusted EBITDA                          $  231.6  $  209.5  $ 454.9  $ 410.3  $  823.1  $  793.6  $  682.5  $  577.6  $  551.6                Information regarding investing and financing categories of the statement of cash flows for the periods presented can be found on               Encompass Health’s website in the Earnings Releases for those periods.   Encompass Health                                Refer to pages 105-109 for end notes.                                       103
 Share Information                                                                  Weighted Average for the Period                                                    Q2                 6 Months                   Full Year                                             2018       2017       2018       2017       2017       2016       2015  Basic shares outstanding(12)                97.9       90.3       97.9       89.5       93.7      89.1       89.4   Convertible perpetual preferred stock(32)   —          —          —          —          —          —         1.0   Convertible senior subordinated notes(12)   —         7.5         —         8.1        4.0        8.5        8.3  Restricted stock awards, dilutive stock    options, restricted stock units, and    common stock warrants(33)                1.7        1.1        1.7        1.4        1.6        1.9        2.3  Diluted shares outstanding                  99.6       98.9       99.6       99.0       99.3      99.5       101.0                                                                          End of Period                                                    Q2                 6 Months                   Full Year  (Millions)                                 2018       2017       2018       2017       2017       2016       2015  Basic shares outstanding(12)                98.0       98.0       98.0       98.0       97.6      88.3       89.3    Encompass Health                           Refer to pages 105-109 for end notes.                               104
 End Notes   Encompass Health                                                                                                                           105
 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 July 2018 and reflects OASIS and HHCAHPS Survey      data collected from January 2017 through December 2017 and claims-based data collected from October 2016 through September 2017. (4)  The 126 for Encompass Health excludes the inpatient rehabilitation hospitals at 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 August 14, 2018, to which this Investor Reference Book is attached as Exhibit 99.1.     Encompass Health                                                                                                                           106
 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 August 14, 2018, 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. 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 August 14, 2018, to which this Investor Reference Book is attached as Exhibit 99.1. (12) 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. (13) 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. (14) On October 28, 2013, the Company announced its board of directors authorized the repurchase of up to $200 million of its common stock. On      February 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. (15) The Medicare Access and CHIP Reauthorization Act of 2015 mandated a market basket update of +1.0% in 2018 for post-acute providers including      inpatient rehabilitation hospitals as well as home health and hospice agencies. (16) 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 October 1, 2019.     Encompass Health                                                                                                                           107
 End Notes, con't.  (17) 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 July 2, 2018, CMS released its Notice of Proposed Rulemaking for CY 2019, which proposes 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 present PDGM as budget neutral, CMS has proposed significant      Medicare rate reductions to offset expected provider behavioral changes in response to PDGM. 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 5.4% 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. (18) 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. (19) 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. (20) Pre-opening expenses include expenses for training new employees on the clinical information system, which vary based on the timing of the first      admission. (21) The leverage ratio is based on trailing four quarters of Adjusted EBITDA of $867.7 million from Q3 2017 to Q2 2018. (22) Represents discharges from 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 (23) 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. (24) 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. (25) Represents home health admissions from 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 (26) Represents hospice admissions from 57 locations in Q2 2018; 38 locations in Q1 2018; 37 locations in Q4 2017, Q3 2017 and Q2 2017; and 35 locations in      Q1 2017 (27) 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                                                                                                                           108
 End Notes, con't.  (28) 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      $1.2 million increase 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. (29) In connection with the acquisition of Encompass Home Health & Hospice, the Company granted stock appreciation rights based on the fair value of the      common stock of HealthSouth Home Health Holdings, Inc. to certain members of Encompass Home Health & Hospice management. The fair value of      Holdings’ common stock is the amount by which the product of the trailing 12-month adjusted EBITDA for Holdings and the median market EBITDA      multiple based on a basket of public home health companies and certain public home health acquisition transactions exceeds the initial fair value      assigned to the Holdings’ stock. The fair value also takes into consideration the balance of the intercompany note in place and the net debt of      Holdings. The fair value of these SARs will vary from period to period primarily based on the performance of the Company’s home health and hospice      segment and the change in the median market multiple. Half of the SARs vest on January 1, 2019, and the other half vest on January 1, 2020. Once      vested, they are exercisable until they expire on December 31, 2024 or in connection with termination of employment. As of June 30, 2018, the fair      value of the SARs was approximately $65 million. (30) 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. (31) 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. (32) In March 2006, the Company completed the sale of 400,000 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. In Q4 2013, the Company      exchanged $320 million of newly issued 2.0% Convertible Senior Subordinated Notes due 2043 for 257,110 shares of its outstanding preferred stock. In      April 2015, the Company exercised its rights to force conversion of all outstanding shares of its preferred stock. On the conversion date, each      outstanding share of preferred stock was converted into 33.9905 shares of common stock, resulting in the issuance of 3,271,415 shares of common      stock. (33) The agreement to settle the Company’s class action securities litigation received final court approval in January 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 January 17, 2017) related to this      settlement were issued on September 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                                                                                                                           109