Encompass Health Revenues Inch Up While Cash Flows Collapse in Q3

The Birmingham, Alabama-based post acute care provider's adjusted free cash flow fell almost 24%.

While net operating revenues rose nearly 9% year-over-year, Encompass Health's cash flows from operating activities fell by more than 42%, according to the company's Q3 earnings report released Monday afternoon.

One quarter after its adjusted free cash flow grew by 28%, Encompass' adjusted free cash flow fell by almost 24% to $109.6 million. The company attributed this decline to an increase in working capital. 

Two bright spots for the Birmingham, Alabama-based post-acute care provider were its income from continuing operations attributable to the company per share and its adjusted earnings per share, which rose 10.1% and 2.2%, respectively.

Encompass' adjusted EBITDA also notched up slightly, totaling $231.6 million.

Related: Encompass Cash Flows Up Almost 28%, Alacare Deal Closed

Once again, Encompass affirmed its full-year guidance for net operating revenues and adjusted EPS, even holding its outlook for adjusted EBITDA to a range of $940 million to $960 million. 

C-SUITE PERSPECTIVE: 

"Both segments experienced strong volume and revenue growth in the third quarter with inpatient discharges increasing 5.5% and home health admissions increasing 22.7% year over year," Mark Tarr, CEO of Encompass Health, said in a statement. "We also made excellent progress in the quarter on our development priorities by opening two new inpatient rehabilitation hospitals, adding 31 beds to existing hospitals, and closing on the acquisition of Alacare Home Health and Hospice."

Net operating revenues for the inpatient rehabilitation segment increased 6.5%, overcoming a 20.2% decline in outpatient and other net operating revenues. 

The most significant growth area for Encompass was its home health and hospice segment, which saw its total revenues increase by nearly 20% to $289.3 million. 

Home health grew 14.2%, but hospice revenues increased by nearly 54% in Q3. Same-store admissions increased 22.7% and adjusted segment EBITDA rose 17.6%, though revenue per episode fell by $15 million.

Looking ahead, Encompass has applied for a $36 million project to build a 50-bed facility in Hillsboro, Oregon, according to a report in the Portland Business Journal earlier this month.

ADDITIONAL Encompass Health Q3 EARNINGS REPORT HIGHLIGHTS:

• Encompass repurchased only $2 million shares of common stock during Q3, bringing its year-to-date total to $46 million.
• General and administrative expenses decreased by $1.6 million compared to Q3 2018.
• Net patient revenue per discharge increased 1% year-over-year, totaling $18,226. 

For complete financial information, review Encompass Health's filing with the Securities and Exchange Commission.