Five insights into Encompass Health’s growth strategy

Encompass Health is among the largest owners and providers of inpatient rehabilitation hospital and home health care in the U.S., and it’s getting even bigger.

The Birmingham, Alabama-based company is growing through acquisitions, organic growth and geographic expansion. Encompass Health currently operates 140 hospitals, 250 home health locations and 94 hospice locations in 42 states and Puerto Rico.

One out of five U.S. residents is projected to be 65 or older by 2030, according to Census data. Encompass Health is positioning itself to serve that aging population, said Mark Tarr, the company’s CEO and president.

1. Focus on specialized areas. The health system’s main strength is its highly efficient rehabilitation business, said Jordan Shields, a partner at Juniper Advisory. Inpatient rehabilitation has been the engine driving Encompass Health to become the leader in its market segment and to grow its revenue he said. The company was among the honorees on last year’s Modern Healthcare Best Place to Work list.
2. Build more inpatient rehabilitation hospitals. Encompass Health is opening eight new inpatient rehab hospitals this year and plans to open 13 more next year. The company aims to set up at least six to 10 hospitals a year moving forward, Tarr said, “We want to make sure that we have the capacity and the scope and scale to care for these patients needing our services,” he said.
3. Pursue joint ventures. Encompass Health and Altru Health System announced a partnership last month that entails Encompass taking over an an existing Altru inpatient rehab facility. Partnerships, typically with health systems that need to bolster their post-acute rehabilitation services, have been a key part of Encompass Health’s business model for over 30 years, Tarr said. Integration can be extremely complicated due to organizational strategy issues, high salaries and big egos, said Adam Block, founder and principal at Charm Economics. Both partners must resolve questions about who serves in leadership roles, how they merge operations, what is the fairest way to share savings and what are the best practices for referring patients between sites of care, he said.
4. Maintain good relationships with referral partners. Encompass Health connects with hospital patients when they are ready to be discharged and later follows up to direct them to home health care resources, Shields said. “They have a good reputation in the industry in terms of taking patients on and keeping them from being readmitted to the hospital,” he said.
5. Provide high-quality services. Many Encompass Health hospitals have technology and clinical programs in place to treat stroke patients, brain and spinal cord injuries and other ailments, Tarr said. “The end goal is to get [patients] back home back to their community and functioning at a much higher level than when they first entered into our hospital,” Tarr said.