Encompass Health

Encompass Health Corporation

Company type	Public
Industry	Healthcare
Predecessor	Amcare, Inc.
Founded	February 22, 1984 (1984-02-22) in Birmingham, Alabama, United States
Founder	Richard M. Scrushy
Headquarters	Birmingham , United States
Area served	United States (38 states and Puerto Rico)
Key people	Greg Carmichael (Chairman), Mark Tarr (President and CEO), Douglas E. Coltharp (CFO)
Products	Inpatient rehabilitation services
Revenue	$5.373 billion (2024)
Number of employees	40,200+ (2024)
Website	www.encompasshealth.com

Encompass Health Corporation, based in Birmingham, Alabama, stands as the foremost provider of inpatient rehabilitation services in the United States, managing 166 inpatient rehabilitation hospitals throughout 38 states and Puerto Rico. Its centers concentrate on delivering rehabilitative treatment to patients recovering from strokes, neurological conditions, cardiac and pulmonary ailments, brain and spinal cord traumas, complex orthopedic injuries, and amputations. In 2022, the company separated its home health and hospice operations into a distinct entity named Enhabit.

Established in 1984 by entrepreneur Richard M. Scrushy, Encompass Health has built a robust presence in the market, reporting revenues of $5.373 billion in 2024 and employing over 40,200 individuals. The leadership team includes Chairman Greg Carmichael, President and CEO Mark Tarr, and Chief Financial Officer Douglas E. Coltharp.

Focusing on facility-based rehabilitation services, the company leverages its widespread network to sustain a competitive edge and secure market share within the healthcare sector. Encompass Health has been consistently acknowledged for its strategic management and workplace environment, earning spots on Fortune’s list of "World's Most Admired Companies," Modern Healthcare’s "Best Places to Work," and Forbes’' "Most Trusted Companies in America."

Early years

Originally incorporated as Amcare, Inc. on February 22, 1984, in Birmingham, Alabama, Encompass Health was founded by Richard M. Scrushy alongside four partners to provide outpatient rehabilitation services. Scrushy conceived the concept in 1983 during his tenure at Lifemark Corporation after identifying an increasing need for physical therapy driven by hospital budget reductions; he viewed outpatient care as a more economical alternative.

The initial capital investment totaled $50,000, with Scrushy personally contributing half of this amount; an additional $1 million was secured from Citicorp Venture Capital. Scrushy held the roles of chairman and CEO until 2003, while his co-founders managed various operational functions. The company launched its first outpatient clinic in Little Rock, Arkansas early in 1984, soon followed by another location in Birmingham.

In 1985, the company rebranded as HealthSouth Rehabilitation Corporation to establish a distinct identity. The acquisition of its first inpatient rehabilitation hospital occurred in 1986, and that same year it conducted an initial public offering (IPO) on the Nasdaq. Scrushy's persuasive presentations to investors garnered significant praise from financial advisors.

By 1989, HealthSouth transitioned its stock listing to the New York Stock Exchange and acquired South Highlands Hospital—a 219-bed facility located in Birmingham’s Southside. This acquisition marked the company’s expansion into acute care hospitals specializing in orthopedics and positioned HealthSouth as a pioneer in sports medicine. The hospital was renamed HealthSouth Medical Center and collaborated with leading orthopedic surgeons such as Dr. James Andrews and Dr. Larry Lemak at the Alabama Sports Medicine and Orthopaedic Center as well as with the American Sports Medicine Institute. This success paved the way for partnerships with prominent orthopedic clinics nationwide, including Dr. Frank Jobe’s Kerlan-Jobe Orthopaedic Clinic based in Los Angeles.

Growth

In its formative years, the company experienced consistent expansion by inaugurating new locations and acquiring other businesses. By 1990, it managed 50 facilities throughout the United States and achieved annual revenues of $400 million by 1992. The company's initial significant acquisition occurred in late 1993 when it purchased 28 inpatient rehabilitation hospitals along with 45 outpatient centers from National Medical Enterprise. This deal doubled the company's size and positioned it as the leading provider of both inpatient and outpatient rehabilitation services nationwide. The subsequent year saw further enhancement of its inpatient operations through the acquisition of ReLife.

Throughout the mid to late 1990s, HealthSouth accelerated its expansion via acquisitions and rebranded itself as HealthSouth Corporation in 1994, removing "Rehabilitation" from its official title. That same year, it ventured into the diagnostic imaging sector by acquiring Diagnostic Health Corporation. Early in 1995, HealthSouth broadened its reach into ambulatory surgery centers by purchasing Surgical Health Corporation, followed by acquiring NovaCare’s rehabilitation hospital division. Additional acquisitions, including a $1.2 billion deal for Surgical Care Affiliates, established HealthSouth as the largest outpatient surgery provider across the U.S. Further reinforcing its market position were purchases such as Caremark Orthopedic Services and Advantage Health Corp. In 1996, the company enhanced its occupational health and diagnostic imaging capabilities by acquiring ReadiCare and Health Images.

The most substantial acquisition of the decade took place in February 1997 when HealthSouth acquired Horizon/CMS Healthcare Corp for $1.8 billion. Horizon/CMS was a publicly traded entity specializing in outpatient rehabilitation, inpatient rehab hospitals, and long-term care facilities. Shortly after this acquisition, HealthSouth divested Horizon/CMS's long-term care assets for $1.15 billion in cash. Expansion persisted with the acquisitions of ASC Network Corp., National Surgery Centers, and 34 surgical centers from Columbia/HCA by mid-1998.

By 1999, following a downturn in earnings attributed to the Balanced Budget Act of 1997, HealthSouth revealed intentions to split into two separate companies: one concentrating on outpatient services such as rehabilitation, surgery centers, diagnostic imaging, and occupational health; the other focusing on inpatient rehabilitation and acute care hospitals. However, this plan was abandoned after earnings projections were revised.

At the close of 1999, HealthSouth operated more than 2,000 facilities nationwide and had extended its presence internationally with operations in countries including the United Kingdom, Australia, Puerto Rico, Canada, and Saudi Arabia. Its commanding market share across various healthcare sectors bolstered its leverage in negotiations with health insurance providers.

As many rivals had been absorbed through acquisitions, expansion activity slowed down. In May 2001, HealthSouth divested its occupational health division to U.S. HealthWorks. Later that year, it collaborated with Oracle Corporation to create an innovative all-digital acute care hospital near its Birmingham headquarters; however, this project was discontinued two years later due to an accounting scandal.

Accounting scandal

In 2002, after substantial stock liquidations by founder Richard Scrushy and an unexpected announcement revealing a $175 million earnings deficit, the U.S. Securities and Exchange Commission (SEC) initiated an inquiry into HealthSouth's financial statements. On March 19, 2003, the SEC formally accused the company of fraudulent accounting practices, alleging that Scrushy and other executives orchestrated misleading earnings reports to satisfy Wall Street’s expectations.

The deception came to light when two company executives admitted their involvement to the FBI, motivated by concerns over discovery and new compliance requirements under Sarbanes-Oxley legislation. The initially reported $175 million shortfall was later uncovered as only a fraction of a more extensive fraud scheme. Scrushy faced indictment in November 2003; however, HealthSouth cooperated with authorities and avoided charges.

In reaction to these events, the board promptly replaced all senior executives, appointing Joel Gordon and Robert P. May as interim chairman and CEO, respectively. The company was delisted from the New York Stock Exchange and removed from the S&P 500 index. Alvarez & Marsal was brought in to oversee financial restatements and lender communications, with JPMorgan Chase acting as financial advisor. Despite early fears of bankruptcy, HealthSouth arranged financing agreements that stabilized cash flow throughout its operations. The fraud was ultimately estimated at approximately $2.7 billion spanning from 1996 through 2003.

Repositioning the company

Between 2003 and 2006, HealthSouth concentrated on rectifying operational shortcomings and resolving issues stemming from the prior accounting scandal. In 2004, Jay Grinney—formerly president of HCA’s Eastern division—was named president and CEO. John Workman, who had served as an executive at U.S. Can Corporation, joined as CFO, while Mike Snow, previously president of HCA’s Gulf Coast division, assumed the role of COO. The company divested non-performing assets and reduced excess corporate holdings, including selling off most of its corporate aircraft.

HealthSouth withdrew from its orthopedic acute care hospital ventures by transferring ownership of its Southside medical center in Birmingham to UAB in 2006. Previously, it sold Doctors' Hospital in Coral Gables to Baptist Health South Florida in 2003 and closed Metro West Hospital in Birmingham in 2005. Additionally, the Dallas medical center was repurposed into an inpatient rehabilitation facility by 2005.

On May 15, 2006, HealthSouth filed its first quarterly report (10-Q) with the SEC since 2002. In August of that year, it unveiled a restructuring strategy involving divestitures of its surgery centers, outpatient services, and diagnostic units, combined with a 1-for-5 reverse stock split aimed at preparing for NYSE relisting. These initiatives were designed to sharpen focus on growing the inpatient rehabilitation hospital segment. Subsequently, the company regained listing on the NYSE in October 2006.

Early in 2007, HealthSouth sold its outpatient division to Select Medical Corporation and divested its surgery center operations to private equity firm TPG Capital while retaining a minority interest. Later that year, The Gores Group acquired its diagnostic division. The outpatient business sale closed in May; meanwhile, transactions for surgery centers and diagnostic imaging were finalized by mid-2007 with the creation of Surgical Care Affiliates and Diagnostic Health Corporation.

In March 2008, HealthSouth sold its corporate headquarters in Birmingham along with the adjacent "Digital Hospital" property to Daniel Corporation but maintained a 40% ownership stake in the hospital site and leased back office space for headquarters operations. The incomplete hospital facility was eventually sold to Community Health Systems and now operates as Grandview Medical Center.

Recent years

After divesting its outpatient rehabilitation, surgery center, and diagnostic imaging units, the company shifted its focus toward growing its inpatient operations by constructing new hospitals and pursuing acquisitions. In 2014, HealthSouth expanded its relatively modest home health and hospice services through the acquisition of Encompass Home Health & Hospice. This area continued to grow with the purchases of CareSouth in 2015, Camillia Healthcare in 2018, Alacare in 2019, and Frontier Home Health and Hospice in 2021.

In 2015, HealthSouth acquired Reliant Hospital Partners for $730 million, adding 11 inpatient rehabilitation hospitals across Texas, Massachusetts, and Ohio to its existing network of 109 facilities. This deal strengthened the company’s standing as the leading provider of inpatient rehabilitation services.

Jay Grinney stepped down from his roles as president, CEO, and board member at the close of 2016 after a 12-year tenure credited with steering the company through a successful recovery following an accounting scandal. Mark Tarr, who had served as COO and held a longstanding executive position, assumed the CEO role in January 2017. The company underwent rebranding in 2018, adopting the name Encompass Health Corporation to consolidate its inpatient, home health, and hospice operations under a single identity. In July 2022, the home health and hospice segment was separated and launched as Enhabit.

Former affiliated companies

• Capstone Capital Corporation — A publicly traded real estate investment trust originally established by HealthSouth
• Diagnostic Health Corporation — Former division specializing in diagnostic imaging
• Enhabit — Previously the home health and hospice unit
• MedPartners — Physician practice management firm initiated with support from HealthSouth; renamed Caremark Rx in 2000 and currently part of CVS Health
• SourceMedical Solutions — Company developing clinical automated programming software founded by HealthSouth
• Surgical Care Affiliates — Former surgery center business unit