Encompass Health's Florida Expansion: A Strategic Bet on Aging Populations and Rehabilitation Demand

Encompass Health's recent opening of a 50-bed rehabilitation hospital in Daytona Beach, Florida, marks a pivotal step in its strategy to capitalize on the state's growing elderly population and surging demand for specialized post-acute care. This facility, alongside its expanding pipeline of Florida projects, positions the company to benefit from demographic trends, regulatory tailwinds, and a robust financial model that could drive long-term stock appreciation.

The Daytona Beach Facility: A Model for Growth
The new hospital, located at 1952 N. Williamson Blvd., features private patient rooms, advanced therapy gyms, and an in-house dialysis center—amenities that distinguish Encompass Health from competitors. Private rooms, in particular, are a competitive differentiator, as they enhance patient satisfaction and reduce infection risks. This focus on quality aligns with Florida's aging demographic: nearly 20% of residents are over 65, and the state's elderly population is projected to grow by 15% by 2030. Patients recovering from strokes, spinal injuries, or orthopedic surgeries—common in an active retirement community—will benefit from the hospital's intensive therapy programs (three hours daily, five days a week).

Florida's Aging Population and Demand Drivers
Florida's appeal as a retirement destination fuels demand for rehabilitation services. Beyond traditional conditions like strokes, Encompass Health is also poised to capitalize on emerging trends, such as injuries from popular senior activities like pickleball. The Daytona News-Journal reported a 30% rise in sports-related injuries among seniors in 2024, a demographic Encompass can serve with its specialized orthopedic programs.

The removal of Certificate of Need (CON) requirements in Florida since 2019 has streamlined hospital construction, enabling Encompass to expand rapidly. Its 2025-2026 pipeline includes facilities in Fort Myers, Wildwood, Lake Worth, and St. Petersburg, all targeting high-growth areas. By 2027, the company plans to open a 50-bed hospital in Apollo Beach, part of the Waterset master-planned community—a forward-thinking move to serve a booming senior housing development.

Financial Strength and EBITDA Margin Potential
Encompass Health's financial performance underscores its operational discipline. In Q1 2025, adjusted EBITDA rose 14.9% year-over-year to $313.6 million, with margins improving to 21.5%, driven by higher discharges (up 6.3%) and Medicare rate increases. The company's updated 2025 guidance projects EBITDA of $1.185–$1.220 billion, reflecting confidence in its expansion strategy.

Key to maintaining margins are cost controls and partnerships. Joint ventures with local health systems, such as Lee Health in Fort Myers, reduce capital risks while leveraging local expertise. Additionally, centralized staffing hubs and partnerships with educational institutions help mitigate labor shortages, keeping turnover below 15%.

Why This Is a Long-Term Investment Opportunity
Encompass Health's Florida expansion aligns perfectly with two unstoppable trends: an aging population and rising demand for post-acute care. With Medicare reimbursements set to grow (+3.3% in Q2/Q3 2025) and Florida's regulatory environment supportive of healthcare infrastructure, the company is well-positioned to scale profitably.

Investors should monitor occupancy rates (78.8% in Q1) and same-store discharge growth (4.4%) as indicators of demand resilience. The stock's valuation—trading at ~20x forward EPS—appears reasonable given its growth trajectory.

Risks and Considerations
While Florida's growth is compelling, challenges remain. Labor costs rose 14% in Q1, and Medicare audit delays could pressure cash flows. However, Encompass's strong free cash flow ($222.4 million in Q1) and disciplined capital allocation (80–90% to expansion) provide a buffer.

Conclusion: A Bullish Outlook
Encompass Health's Florida strategy is a textbook example of aligning infrastructure investments with demographic realities. With its focus on quality care, strategic partnerships, and operational efficiency, the company is primed to dominate the post-acute care market. For investors seeking exposure to aging population trends and reliable healthcare demand, Encompass Health's stock merits a long-term buy.