Does Apple's Out-of-Warranty Replacement cover iPhones regardless of condition?
No, it does not. Out-of-warranty service is provided for phones which have not suffered what is defined as "catastrophic damage" and additional fees on top of the OOW service fee may be charged up to the replacement value of the product. 

Please review Section 3 of the ERS/OOW Terms page: Source

Note that in this response, I am not qualifying your repair as either OOW or beyond that and needing to pay replacement fees. That is just a potential outcome, and is meant to highlight that not all OOW damage is covered.