Investments in and Advances to Nonconsolidated Affiliates

9 Months Ended

Sep. 30, 2019

Investments in and Advances to Affiliates, Schedule of Investments [Abstract]

Investments in and Advances to Nonconsolidated Affiliates

As of September 30, 2019 and December 31, 2018, we had $8.0 million and $12.2 million, respectively, of investments in and advances to nonconsolidated affiliates included in Other long-term assets in our condensed consolidated balance sheets. Investments in and advances to nonconsolidated affiliates represent our investments in five partially owned subsidiaries, of which four are general or limited partnerships, limited liability companies, or joint ventures in which Encompass Health or one of its subsidiaries is a general or limited partner, managing member, member, or venturer, as applicable. We do not control these affiliates but have the ability to exercise significant influence over the operating and financial policies of certain of these affiliates. Our ownership percentages in these affiliates range from approximately 8% to 60%. We account for these investments using the cost and equity methods of accounting.

The following summarizes the combined results of operations of our equity method affiliates (on a 100% basis, in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net operating revenues	$	5.2		$	10.1		$	27.3		$	31.6
Operating expenses	(2.9		)	(5.9		)	(16.4		)	(19.1		)
Income from continuing operations, net of tax	2.3			4.1			10.9			12.4
Net income	2.3			4.1			10.9			12.4

As a result of an amendment to the joint venture agreement related to Yuma Rehabilitation Hospital, the accounting for this hospital changed from the equity method of accounting to a consolidated entity effective July 1, 2019. The amendment revised certain participatory rights held by our joint venture partner resulting in Encompass Health gaining control of this entity from an accounting perspective. We accounted for this change in control as a business combination and consolidated this entity using the acquisition method. The consolidation of Yuma Rehabilitation Hospital did not have a material impact on our financial position, results of operations, or cash flows. As a result of our consolidation of this hospital and the remeasurement of our previously held equity interest at fair value, goodwill increased by $24.9 million and we recorded a $19.2 million gain as part of Other income during the three and nine months ended September 30, 2019.