Encompass Health Corp

Previous wording

We are the nation’s largest owner and operator of inpatient rehabilitation hospitals in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate hospitals in 38 states and Puerto Rico, with concentrations in Florida and Texas. As of March 31, 2025, we operated 167 inpatient rehabilitation hospitals. For additional information about our business, see Item 1, Business, and Item 1A, Risk Factors, of the 2024 Form 10‑K.

Current wording

We are the nation’s largest owner and operator of inpatient rehabilitation hospitals (“IRFs”) in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate IRFs in 38 states and Puerto Rico, with concentrations in Florida and Texas. As of June 30, 2025, we operated 168 IRFs. For additional information about our business, see Item 1, Business, and Item 1A, Risk Factors, of the 2024 Form 10‑K.

Previous wording

During the three months ended March 31, 2025, Net operating revenues increased 10.6% over the same period of 2024 due primarily to volume growth and increased pricing. See “Results of Operations” section of this Item for additional volume and pricing information.

Current wording

During the three and six months ended June 30, 2025, Net operating revenues increased 12.0% and 11.3%, respectively, over the same periods of 2024 due primarily to volume growth and increased pricing. See “Results of Operations” section of this Item for additional volume and pricing information.

Previous wording

•expanded our capacity by adding 25 new beds to existing hospitals; and

Current wording

•expanded our capacity by adding 51 new beds to existing hospitals; and

Previous wording

We also continued our shareholder distributions during the three months ended March 31, 2025 through common stock repurchases and paying a quarterly cash dividend. For additional information see the “Liquidity and Capital Resources” section of this Item.

Current wording

We also continued our shareholder distributions during the six months ended June 30, 2025 through common stock repurchases and paying a quarterly cash dividend. For additional information see the “Liquidity and Capital Resources” section of this Item.

Previous wording

We remain optimistic regarding the intermediate and long-term prospects of our business. Demographic trends, such as population aging, should continue to increase long-term demand for the services we provide. While we treat patients of all ages, most of our patients are 65 and older, and the number of Medicare enrollees is expected to grow approximately 3% per year for the foreseeable future, reaching approximately 73 million people over the age of 65 by 2030. More specifically, the average age of our Medicare patients is approximately 78, and the population group ranging in ages from 75 to 79 is expected to grow at approximately 5% per year through 2026. We believe the demand for the services we provide will continue to increase as the U.S. population ages. We believe these factors align with our strengths in, and focus on, inpatient rehabilitation services.

Current wording

We remain optimistic regarding the intermediate and long-term prospects of our business. Demographic trends, such as population aging, should continue to increase long-term demand for the services we provide. While we treat patients of all ages, most of our patients are 65 and older, and the number of Medicare enrollees is expected to grow approximately 3% per year for the foreseeable future, reaching approximately 71 million people over the age of 65 by 2030. More specifically, the average age of our Medicare patients is approximately 77, and the population group for ages 75 and older is expected to grow at approximately 4% per year through 2030. We believe the demand for the services we provide will continue to increase as the U.S. population ages. We believe these factors align with our strengths in, and focus on, inpatient rehabilitation services.

Previous wording

Healthcare is a highly regulated industry facing many well-publicized regulatory and reimbursement challenges. Medicare reimbursement for inpatient rehabilitation facilities (“IRFs”) has recently undergone significant changes. The future of many aspects of healthcare regulation generally and Medicare reimbursement specifically remains uncertain. Successful healthcare providers are those able to adapt to changes in the regulatory and operating environments, build strategic relationships across the healthcare continuum, and consistently provide high-quality, cost-effective care. We believe we have the necessary capabilities—change agility, strategic relationships, quality of patient outcomes, cost effectiveness, and ability to capitalize on growth opportunities—to adapt to and succeed in a dynamic, highly regulated industry, and we have a proven track record of doing so. For a detailed discussion of the challenges we face, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Executive Overview—Key Challenges” of the 2024 Form 10‑K.

Current wording

Healthcare is a highly regulated industry facing many well-publicized regulatory and reimbursement challenges. The future of many aspects of healthcare regulation generally and Medicare reimbursement specifically remains uncertain. Successful healthcare providers are those able to adapt to changes in the regulatory and operating environments, build strategic relationships across the healthcare continuum, and consistently provide high-quality, cost-effective care. We believe we have the necessary capabilities—change agility, strategic relationships, quality of patient outcomes, cost effectiveness, and ability to capitalize on growth opportunities—to adapt to and succeed in a dynamic, highly regulated industry, and we have a proven track record of doing so. For a detailed discussion of the challenges we face, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Executive Overview—Key Challenges” of the 2024 Form 10‑K.

Previous wording

•Changes in Medicare Reimbursement and Regulatory Requirements for Operating IRFs. On April 11, 2025, the Centers for Medicare & Medicaid Services (“CMS”) released its notice of proposed rulemaking for fiscal year 2026 for IRFs (the “2026 Proposed Rule”) under the inpatient rehabilitation facility prospective payment system. The 2026 Proposed Rule will implement a net 2.6% market basket increase (market basket update of 3.4% reduced by a productivity adjustment of 0.8%) effective for discharges between October 1, 2025 and September 30, 2026. The 2026 Proposed Rule also includes changes that impact our hospital-by-hospital base rate for Medicare reimbursement. Such changes include, but are not limited to, revisions to the wage index, updates to outlier payments, and updates to the case-mix group relative weights and average lengths of stay values. Based on our analysis that utilizes the acuity of our patients annualized over a twelve-month period ended March 31, 2025, our experience with outlier payments over this same time frame, and other factors, we believe the 2026 Proposed Rule will result in a net increase to our Medicare payment rates of approximately 2.7% effective October 1, 2025.

Current wording

•Changes in Medicare Reimbursement and Regulatory Requirements for Operating IRFs. On August 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) released its notice of final rulemaking for fiscal year 2026 for IRFs (the “2026 Final IRF Rule”) under the inpatient rehabilitation facility prospective payment system. The 2026 Final IRF Rule will implement a net 2.6% market basket increase (market basket update of 3.3% reduced by a productivity adjustment of 0.7%) effective for discharges between October 1, 2025 and September 30, 2026. The 2026 Final IRF Rule also includes changes that impact our hospital-by-hospital base rate for Medicare reimbursement. Such changes include, but are not limited to, revisions to the wage index, updates to outlier payments, and updates to the case-mix group relative weights and average lengths of stay values. Based on our analysis that utilizes the acuity of our patients annualized over a twelve-month period ended June 30, 2025, our experience with outlier payments over this same time frame, and other factors, we believe the 2026 Final IRF Rule will result in a net increase to our Medicare payment rates of approximately 2.9% effective October 1, 2025.

Previous wording

In August 2023, IRFs located in Alabama began participation in CMS’s five-year review choice demonstration (“RCD”), under which Medicare reimbursement claims are assessed for compliance with applicable coverage and clinical documentation requirements. On March 1, 2024, CMS announced the expansion of RCD, effective June 17, 2024, to include IRFs located in Pennsylvania and billing to a certain Medicare Administrative Contractor (“MAC”). We do not bill to this MAC, so we are not subject to RCD in Pennsylvania at this time. CMS plans to expand RCD further to Texas and California, but the timing for doing so is not known. We operate 48 inpatient rehabilitation hospitals (representing approximately 29% of our IRF Medicare claims) in the four RCD states. CMS intends to expand the RCD program after the initial four state rollout but has yet to provide details of that expansion.

Current wording

In August 2023, IRFs located in Alabama began participation in CMS’s review choice demonstration (“RCD”), under which Medicare reimbursement claims are assessed for compliance with applicable coverage and clinical documentation requirements. On March 1, 2024, CMS announced the expansion of RCD, effective June 17, 2024, to include IRFs located in Pennsylvania and billing to a certain Medicare Administrative Contractor (“MAC”). We do not bill to this MAC, so we are not subject to RCD in Pennsylvania at this time. CMS plans to expand RCD further to Texas and California, but the timing for doing so is not known. We operate 48 inpatient rehabilitation hospitals (representing approximately 29% of our IRF Medicare claims) in the four RCD states. CMS intends to expand the RCD program after these initial four state rollouts but has yet to provide details of that expansion.

Previous wording

Under RCD, participating IRFs have an initial choice between pre-claim or post-payment review of 100% of Medicare claims submitted to demonstrate compliance with applicable requirements during the first six-month review period or cycle. We elected the pre-claim review option for our IRFs in Alabama for the first cycle. Under the pre-claim review choice, services can begin prior to the submission of the review request and continue while the decision is being made. The pre-claim review request with required documentation must be submitted, reviewed, and approved before the final claim is paid. If a certain percentage of the claims reviewed are found to be valid, the IRF may then opt out of the 100% review. The opt-out validation percentages for the second and third cycles were 85% or greater and 90% or greater, respectively. In opting out, the IRF may elect spot prepayment reviews of samples consisting of 5% of total claims or selective post-payment review of a statistically valid random sample. Our claim validation rate for the first cycle ending in February 2024 exceeded the required 80% at our IRFs in Alabama. For the second cycle, which began on May 1, 2024, we elected not to opt out, so our IRFs in Alabama remained subject to the 100% pre-claim review. None of our IRFs in Alabama achieved the 85% claim validation rate for the second cycle ending in October 2024. We believe many of the non-affirmations in the second cycle were based on application of improper standards or requirements that directly conflict with the Medicare coverage criteria for IRFs. In the third cycle, we are again submitting 100% of review requests pre-claim. We have engaged, and will continue to engage, with the MAC and CMS to ensure the review process is consistent with existing rules, regulations and statutes. Given the inconsistent review process applied by the MAC across the previous two cycles, we cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over its five-year term and ultimately our financial position, results of operations, and cash flows.

Current wording

Under RCD, participating IRFs have an initial choice between pre-claim or post-payment review of 100% of Medicare claims submitted to demonstrate compliance with applicable requirements during the first six-month review period or cycle. We elected the pre-claim review option for our IRFs in Alabama for the first cycle. Under the pre-claim review choice, services can begin prior to the submission of the review request and continue while the decision is being made. The pre-claim review request with required documentation must be submitted, reviewed, and approved before the final claim is paid. If a certain percentage of the claims reviewed are found to be valid, the IRF may then opt out of the 100% review. The opt-out validation percentages for the second and third cycles were 85% or greater and 90% or greater, respectively. In opting out, the IRF may elect spot prepayment reviews of samples consisting of 5% of total claims or selective post-payment review of a statistically valid random sample. Our claim validation rate for the first cycle ending in February 2024 exceeded the required 80% at our IRFs in Alabama. For the second cycle, which began on May 1, 2024, we elected not to opt out, so our IRFs in Alabama remained subject to the 100% pre-claim review. None of our IRFs in Alabama achieved the 85% claim validation rate for the second cycle ending in October 2024. In the third cycle, we again submitted 100% of review requests pre-claim. None of our IRFs in Alabama achieved the 90% claim validation rate for the third cycle ending in June 2025. We believe many of the non-affirmations in the second and third cycles were based on application of improper standards or requirements that directly conflict with the Medicare coverage criteria for IRFs. We have engaged, and will continue to engage, with the MAC and CMS to ensure the review process is consistent with existing rules, regulations and statutes. Given the inconsistent review process applied by the MAC across the previous three cycles, we cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over the program’s term and ultimately on our financial position, results of operations, and cash flows.

Previous wording

•Recruiting and Retaining High-Quality Personnel. Recruiting and retaining qualified personnel, including management, for our inpatient hospitals remains a high priority for us. We attempt to maintain a comprehensive compensation and benefits package that allows us to remain competitive in this challenging staffing environment while remaining consistent with our goal of providing high-quality, cost-effective care. Additionally, our operations have been affected and may in the future be affected by staffing shortages. In recent years, staffing shortages and competition have resulted in increased labor costs, including significant sign-on and shift bonuses, and increased use of contract labor. See Item 1A, Risk Factors, of the 2024 Form 10‑K for further discussion of competition for staffing, shortages of qualified personnel, and other factors that may increase our labor costs and constrain our ability to take new patients.

Current wording

•Recruiting and Retaining High-Quality Personnel. Recruiting and retaining qualified personnel, including management, for our inpatient hospitals remains a high priority for us. We attempt to maintain a comprehensive compensation and benefits package that allows us to be competitive in this challenging staffing environment while remaining consistent with our goal of providing high-quality, cost-effective care. Additionally, our operations have been affected and may in the future be affected by staffing shortages. In recent years, staffing shortages and competition have resulted in increased labor costs, including significant sign-on and shift bonuses, and increased use of contract labor. See Item 1A, Risk Factors, of the 2024 Form 10‑K for further discussion of competition for staffing, shortages of qualified personnel, and other factors that may increase our labor costs and constrain our ability to take new patients.

Previous wording

Our consolidated Net operating revenues increased during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to increased volumes and favorable pricing. Discharge growth included a 4.4% increase in same-store discharges. Discharge growth from new stores during the three months ended March 31, 2025 compared to the same period of 2024 resulted from our joint ventures in Atlanta, Georgia (May 2024) and Louisville, Kentucky (June 2024), as well as our wholly owned hospitals in Kissimmee, Florida (May 2024), Johnston, Rhode Island (July 2024), Fort Mill, South Carolina (September 2024), and Houston, Texas (November 2024). Growth in net patient revenue per discharge during the three months ended March 31, 2025 compared to the same period of 2024 primarily resulted from increase in reimbursement rates.

Current wording

Our consolidated Net operating revenues increased during the three months ended June 30, 2025 compared to the same period of 2024 primarily due to increased volumes and favorable pricing. Discharge growth included a 4.7% increase in same-store discharges. Discharge growth from new stores during the three months ended June 30, 2025 compared to the same period of 2024 resulted from our joint ventures in Atlanta, Georgia (May 2024), Louisville, Kentucky (June 2024), Athens, Georgia (March 2025), and Fort Myers, Florida (May 2025), as well as our wholly owned hospitals in Kissimmee, Florida (May 2024), Johnston, Rhode Island (July 2024), Fort Mill, South Carolina (September 2024), and Houston, Texas (November 2024). Growth in net patient revenue per discharge during the three months ended June 30, 2025 compared to the same period of 2024 primarily resulted from increase in reimbursement rates and lower revenue reserves related to bad debt. Revenue reserves related to bad debt as a percentage of Net operating revenues decreased during the three months ended June 30, 2025 to 2.0% from 2.9% during the three months ended June 30, 2024 primarily due to a decrease in medical necessity claim review audits.

Previous wording

The increase in outpatient and other revenue during the three months ended March 31, 2025 included an increase of $5.3 million in Medicaid supplemental payments (offset by an increase of $7.1 million in provider tax expenses included in Other operating expenses). Medicaid supplemental payments represent amounts received under state directed and supplemental payment programs associated with Medicaid. For additional information, see Item 1, Business, “Medicaid Reimbursement,” of the 2024 Form 10‑K.

Current wording

The increase in outpatient and other revenue during the three and six months ended June 30, 2025 included an increase of $8.5 million and $13.8 million, respectively, in Medicaid supplemental payments (offset by an increase of $9.3 million and $16.4 million, respectively, in provider tax expenses included in Other operating expenses). Medicaid supplemental payments represent amounts received under state directed and supplemental payment programs associated with Medicaid. For additional information, see Item 1, Business, “Medicaid Reimbursement,” of the 2024 Form 10‑K.

Previous wording

Salaries and benefits increased during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of full-time equivalents as a result of our development activities. Salaries and benefits decreased as a percent of Net operating revenues during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to higher volumes.

Current wording

Salaries and benefits increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of full-time equivalents as a result of our development activities. Salaries and benefits decreased as a percent of Net operating revenues during the three and six months ended June 30, 2025 compared to the same periods of 2024 primarily due a decline in EPOB and decreases in both contract labor and sign-on and shift bonuses.

Previous wording

Other operating expenses increased during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to increased provider taxes and higher costs resulting from our development activities. Other operating expenses decreased as a percent of Net operating revenues during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to higher volumes.

Current wording

Other operating expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended June 30, 2025 compared to the same period of 2024 primarily due to increased provider taxes and higher costs resulting from our development activities.

Previous wording

Other operating expenses during the three months ended March 31, 2024 included a $10.4 million impairment charge related to the closure of our joint venture inpatient rehabilitation hospital in Eau Claire, Wisconsin. In January 2024, we received notice that our joint venture partner intended to close its acute-care hospital in which our joint venture inpatient rehabilitation hospital was located. We closed that joint venture hospital in February 2024 and incurred a one-time impairment charge of $10.4 million. The impact to Net income attributable to Encompass Health during the three months ended March 31, 2024 resulting from the impairment was $1.8 million after reductions for Net income attributable to noncontrolling interestsof $7.3 million and the Provision for income tax expense of $1.3 million.

Current wording

Other operating expenses increased during the six months ended June 30, 2025 compared to the same period of 2024 primarily due to increased provider taxes and higher costs resulting from our development activities. Other operating expenses during the six months ended June 30, 2024 also included a $10.4 million impairment charge related to the closure of our joint venture inpatient rehabilitation hospital in Eau Claire, Wisconsin. In January 2024, we received notice that our joint venture partner intended to close its acute-care hospital in which our joint venture inpatient rehabilitation hospital was located. We closed that joint venture hospital in February 2024 and incurred a one-time impairment charge of $10.4 million. The impact to Net income attributable to Encompass Health during the six months ended June 30, 2024 resulting from the impairment was $1.8 million after reductions for Net income attributable to noncontrolling interestsof $7.3 million and the Provision for income tax expense of $1.3 million. Other operating expenses decreased as a percent of Net operating revenues during the six months ended June 30, 2025 compared to the same period of 2024 primarily due to higher volumes.

Previous wording

General and administrative expenses increased during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to higher salaries, benefits, and software expenses partially offset by mark-to-market adjustments on our non-qualified deferred compensation plan. General and administrative expenses decreased as a percent of Net operating revenues during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to higher volumes.

Current wording

General and administrative expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended June 30, 2025 compared to the same period of 2024 primarily due to mark-to-market adjustments on our non-qualified deferred compensation plan and higher incentive compensation, benefits, and salaries. General and administrative expenses increased during the six months ended June 30, 2025 compared to the same period of 2024 primarily due to higher incentive compensation, benefits, and software expenses.

Previous wording

Depreciation and amortization increased during the three months ended March 31, 2025 compared to the same period of 2024 due to our capital investments. See “Executive Overview” section of this item for information related to our development activity. We expect Depreciation and amortization to increase going forward as a result of our recent and ongoing capital investments.

Current wording

Depreciation and amortization increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 due to our capital investments. See “Executive Overview” section of this item for information related to our development activity. We expect Depreciation and amortization to increase going forward as a result of our recent and ongoing capital investments.

Previous wording

Our pre-tax income from continuing operations increased during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to the increase in Net operating revenues as discussed above.

Current wording

Our pre-tax income from continuing operations increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 primarily due to the increase in Net operating revenues as discussed above.

Previous wording

Our Provision for income tax expense increased during the three months ended March 31, 2025 compared to the same period of 2024 primarily due to higher Income from continuing operations before income tax expense.

Current wording

Our Provision for income tax expense increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 primarily due to higher Income from continuing operations before income tax expense.

Previous wording

We currently estimate our cash payments for income taxes to be approximately $160 million to $180 million, net of refunds, for 2025. These payments are expected to primarily result from federal and state income tax expenses based on estimates of taxable income for 2025.

Current wording

The OBBBA contains a broad range of tax reform provisions affecting businesses. While tax changes in the OBBBA are not expected to have a material impact on our effective tax rate, we do anticipate that certain tax provisions in the OBBBA, namely the provision that permanently extends bonus depreciation for assets placed in service after January 19, 2025 and the provision allowing for immediate expensing of certain research and development costs, to result in current deductions that will result in lower cash income tax for 2025. We currently estimate these provisions to produce an additional approximately $180 million in current deductions resulting in approximately $50 million in cash tax savings in 2025. We currently estimate our cash payments for income taxes to be approximately $110 million to $130 million, net of refunds, for 2025. These payments are expected to primarily result from federal and state income tax expenses based on estimates of taxable income for 2025 which include estimates of the tax provisions contained in the OBBBA. We continue to evaluate the tax and other provisions of the OBBBA and the potential effects on our financial position, results of operations, and cash flows. The OBBBA includes other non-tax specific, healthcare-related items. For further discussion of these items, see the “Executive Overview” section of this Item.

Previous wording

The increase in Net income attributable to noncontrolling interests during the three months ended March 31, 2025 compared to the same period of 2024 resulted from increased profitability from certain existing joint venture hospitals. Net income attributable to noncontrolling interests during the three months ended March 31, 2024 included the impact from the impairment related to the closure of our joint venture hospital in Eau Claire, Wisconsin in February 2024, as discussed above.

Current wording

The increase in Net income attributable to noncontrolling interests during the three and six months ended June 30, 2025 compared to the same periods of 2024 resulted from increased profitability from certain existing joint venture hospitals. Net income attributable to noncontrolling interests during the six months ended June 30, 2024 included the impact from the impairment related to the closure of our joint venture hospital in Eau Claire, Wisconsin in February 2024, as discussed above.

Previous wording

As of March 31, 2025, we had $95.8 million in Cash and cash equivalents. This amount excludes $27.0 million in Restricted cash and $122.9 million of restricted marketable securities ($44.6 million included in Other current assets and $78.3 million included in Other long-term assetsin our condensed consolidated balance sheet). Our restricted assets pertain primarily to obligations associated with our captive insurance company, as well as obligations we have under agreements with joint venture partners. See Note 4, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2024 Form 10‑K.

Current wording

As of June 30, 2025, we had $99.1 million in Cash and cash equivalents. This amount excludes $38.3 million in Restricted cash and $128.1 million of restricted marketable securities ($33.2 million included in Other current assets and $94.9 million included in Other long-term assetsin our condensed consolidated balance sheet). Our restricted assets pertain primarily to obligations associated with our captive insurance company, as well as obligations we have under agreements with joint venture partners. See Note 4, Marketable Securities, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 4, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2024 Form 10‑K.

Previous wording

For a discussion of risks and uncertainties facing us see Item 1A, Risk Factors, under Part II, Other Information, of this report and Item 1A, Risk Factors, of the 2024 Form 10‑K.

Current wording

See the “Results of Operations” section above for information related to our estimated cash tax savings in 2025 resulting from the OBBBA. For a discussion of risks and uncertainties facing us see Item 1A, Risk Factors, under Part II, Other Information, of this report and Item 1A, Risk Factors, of the 2024 Form 10‑K.

Previous wording

Operating activities. The increase in Net cash provided by operating activities for the three months ended March 31, 2025 compared to the same period of 2024 primarily resulted from an increase in Net income which was driven by growth in Net operating revenues.

Current wording

Operating activities. The increase in Net cash provided by operating activities for the six months ended June 30, 2025 compared to the same period of 2024 primarily resulted from an increase in Net income which was driven by growth in Net operating revenues.

Previous wording

Investing activities. The increase in Net cash used in investing activities during the three months ended March 31, 2025 compared to the same period of 2024 primarily resulted from increased Purchases of property, equipment, and intangible assets.

Current wording

Investing activities. The increase in Net cash used in investing activities during the six months ended June 30, 2025 compared to the same period of 2024 primarily resulted from increased Purchases of property, equipment, and intangible assets.

Previous wording

Financing activities. The increase in Net cash used in financing activities during the three months ended March 31, 2025 compared to the same period of 2024 primarily resulted from higher Repurchases of common stock, including fees and expenses, higher net debt payments on our revolving credit facility and lower Contributions from noncontrolling interests of consolidated affiliates. For additional information related to our stock repurchases, see “Authorizations for Returning Capital to Stakeholders” section below.

Current wording

Financing activities. The increase in Net cash used in financing activities during the six months ended June 30, 2025 compared to the same period of 2024 primarily resulted from higher Repurchases of common stock, including fees and expenses, higher net debt payments on our revolving credit facility and lower Contributions from noncontrolling interests of consolidated affiliates. For additional information related to our stock repurchases, see “Authorizations for Returning Capital to Stakeholders” section below.

Previous wording

(b) Interest on our fixed rate debt is presented using the stated interest rate. Interest pertaining to our bonds is included to their respective ultimate maturity dates. Interest related to finance lease obligations is excluded from this line. Amounts exclude amortization of debt discounts, amortization of loan fees, or fees for lines of credit that would be included in interest expense in our condensed consolidated statements of comprehensive income.

Current wording

(b) Interest on our fixed rate debt is presented using the stated interest rate. Interest pertaining to our bonds is included to their respective ultimate maturity dates. Interest related to finance lease obligations is excluded from this line. Amounts exclude amortization of debt discounts, amortization of loan fees, or fees for lines of credit that would be included in interest expense in our condensed consolidated statements of operations.

Previous wording

Our capital expenditures include costs associated with our hospital renovation program, de novo projects, capacity expansions, technology initiatives, and building and equipment upgrades and purchases. During the three months ended March 31, 2025, we made capital expenditures of approximately $163 million for property, equipment, and intangible assets. During 2025, we expect to spend approximately $755 million to $790 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $215 million to $225 million of this budgeted amount is considered nondiscretionary expenditures, which we may refer to in other filings as “maintenance” expenditures. Actual amounts spent will be dependent upon the timing of development projects. At March 31, 2025, we have projects under construction which have an estimated additional cost to complete over the next two years of approximately $327 million. We expect to fund capital expenditures using cash on hand and borrowings under our revolving credit facility.

Current wording

Our capital expenditures include costs associated with our hospital renovation program, de novo projects, capacity expansions, technology initiatives, and building and equipment upgrades and purchases. During the six months ended June 30, 2025, we made capital expenditures of approximately $320 million for property, equipment, and intangible assets. During 2025, we expect to spend approximately $785 million to $820 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $215 million to $225 million of this budgeted amount is considered nondiscretionary expenditures, which we may refer to in other filings as “maintenance” expenditures. Actual amounts spent will be dependent upon the timing of development projects. At June 30, 2025, we have projects under construction which have an estimated additional cost to complete over the next two years of approximately $380 million. We expect to fund capital expenditures using cash on hand and borrowings under our revolving credit facility.

Previous wording

In October 2024 and February 2025, our board of directors declared cash dividends of $0.17 per share that were paid in January 2025 and April 2025, respectively. We expect quarterly dividends to be paid in January, April, July, and October. However, the actual declaration of any future cash dividends, and the setting of record and payment dates as well as the per share amounts, will be at the discretion of our board of directors after consideration of various factors, including our capital position and alternative uses of funds. Cash dividends are expected to be funded using cash flows from operations, cash on hand, and availability under our revolving credit facility.

Current wording

In October 2024, February 2025, and May 2025, our board of directors declared cash dividends of $0.17 per share that were paid in January 2025, April 2025, and July 2025, respectively. On July 24, 2025, our board of directors approved an increase in our quarterly dividend and declared a cash dividend of $0.19 per share, payable on October 15, 2025 to stockholders of record on October 1, 2025. We expect quarterly dividends to be paid in January, April, July, and October. However, the actual declaration of any future cash dividends, and the setting of record and payment dates as well as the per share amounts, will be at the discretion of our board of directors after consideration of various factors, including our capital position and alternative uses of funds. Cash dividends are expected to be funded using cash flows from operations, cash on hand, and availability under our revolving credit facility.

Previous wording

In 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock, which has been amended from time to time. Most recently, on July 24, 2024, our board approved resetting the aggregate common stock repurchase authorization to $500 million. As of March 31, 2025, approximately $458 million remained under this authorization. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the three months ended March 31, 2025, we repurchased 0.3 million shares of our common stock in the open market for $32.1 million under this repurchase authorization using cash on hand. Future repurchases under this authorization generally are expected to be funded using a combination of cash on hand and availability under our $1 billion revolving credit facility. For additional information, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report.

Current wording

In 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock, which has been amended from time to time. Most recently, on July 24, 2024, our board approved resetting the aggregate common stock repurchase authorization to $500 million. As of June 30, 2025, approximately $433 million remained under this authorization. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the six months ended June 30, 2025, we repurchased 0.6 million shares of our common stock in the open market for $56.8 million under this repurchase authorization using cash on hand. Future repurchases under this authorization generally are expected to be funded using a combination of cash on hand and availability under our $1 billion revolving credit facility. For additional information, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report.