Encompass Health Corporation EHC recently formed a joint venture (JV) with Knoxville-based Covenant Health, which is the healthcare system offering diverse range of healthcare services in Tennessee. Through this alliance, the companies will be responsible for operating the Patricia Neal Rehabilitation Center. Notably, this rehab centre comes under the vast hospital network of Covenant Health.
The JV also involves joint filing of two certificate of need applications by both the healthcare providers, the first one being construction of a freestanding inpatient rehabilitation hospital with 51 beds on Fort Sanders West campus, which also falls under Covenant Health’s hospital network. The second one involves converting all the semi-private rooms of the Patricia Neal Rehabilitation Center into private and renovating the center to a hospital-in-hospital structure containing 22 beds.
Notably, Patricia Neal Rehabilitation Center will continue to operate in during the renovation period. The construction of the new hospital and renovation of the existing one, which are likely to conclude in 2022, are yet to receive customary approval.
The JV will result in development of inpatient rehabilitation hospitals, which will aid patients in recovering from debilitating illnesses and injuries. This, in turn, is likely to enable Encompass Health in resolving health issues of Knoxville residents more efficiently. We believe that Covenant Health will also be benefitted from this venture considering strong presence of Encompass Health in the United States.
It is to be noted that another U.S. healthcare provider has also tied up with Covenant Health based on its diverse range of healthcare services. Last month, Acadia Healthcare Company, Inc. ACHC collaborated with Covenant Health, with the tie-up involving building a new behavioral health hospital. The alliance is intended to cater to mental health issues, which remain quite unaddressed owing to the dearth of resources in East Tennessee.
Notably, shares of Encompass Health, which carries a Zacks Rank #3 (Hold), have lost 1.9% in a year compared with the industry’s decline of 5%.
Furthermore, this is not the first time that Encompass Health has entered into a JV with established healthcare systems. Last month, the University of Iowa Health Network Rehabilitation Hospital — a JV between Encompass Health and University of Iowa Health Systems announced in January this year — started operating. Plans of establishing this hospital were declared by Encompass Health in early 2019.
In addition, it opened Encompass Health Rehabilitation Hospital of Sioux Falls last month, which is intended to offer improved healthcare services in South Dakota. This hospital marks the company’s 136th rehabilitation hospital, which bears testament to the robust hospital network of Encompass Health. The company has also unveiled plans in June to inaugurate Encompass Health Rehabilitation Hospital of Libertyville that is expected to start operations in spring 2022.
All these initiatives underline the company’s efforts to offer improved healthcare services across the United States. These efforts will certainly provide a sigh of relief to several people across the country, who are already grappling with the COVID-19 pandemic. The current situation definitely calls for greater access to healthcare services, which positions Encompass Health well for growth in the long term.
Stocks to Consider
Some better-ranked stocks in the medical space include Brookdale Senior Living Inc. BKD and Abeona Therapeutics Inc. ABEO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brookdale and Abeona Therapeutics have a trailing four-quarter positive earnings surprise of 2.33% and 5.45%, on average, respectively.
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