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KINDRED HEALTHCARE

NYSE:KND

InvestorPresentation June2012

KINDREDHEALTHCARE ContinuetheCare

ForwardLookingStatements
ThispresentationincludesforwardlookingstatementswithinthemeaningofSection 27AoftheSecuritiesActof1933,asamended,andSection 21EoftheSecuritiesExchangeActof1934,asamended.Allstatementsregarding Kindredsexpectedfuturefinancialposition,resultsofoperations,cashflows,financingplans,businessstrategy,budgets,capitalexpenditures,competitivepositions,growthopportunities,plansandobjectivesofmanagementand statementscontainingthewordssuchasanticipate, approximate, believe, plan, estimate, expect, project, could, should, will, intend, may andothersimilarexpressions,areforwardlookingstatements. Suchforwardlookingstatementsareinherentlyuncertain,andstockholdersandotherpotentialinvestorsmustrecognizethatactualresultsmaydiffermateriallyfromKindredsexpectationsasaresultofavarietyoffactors, including,withoutlimitation,thosediscussedbelow.Suchforwardlookingstatementsarebaseduponmanagementscurrentexpectationsandincludeknownandunknownrisks,uncertaintiesandotherfactors,manyofwhich Kindredisunabletopredictorcontrol,thatmaycauseKindredsactualresultsorperformancetodiffermateriallyfromanyfutureresultsorperformanceexpressedorimpliedbysuchforwardlookingstatements.These statementsinvolverisks,uncertaintiesandotherfactorsdiscussedbelowanddetailedfromtimetotimeinKindredsfilingswiththeSecuritiesandExchangeCommission(theSEC). Inadditiontothefactorssetforthabove,otherfactorsthatmayaffecttheCompanysplansorresultsinclude,withoutlimitation,(a)theimpactofhealthcarereform,whichwillinitiatesignificantreformstotheUnitedStates healthcaresystem,includingpotentialmaterialchangestothedeliveryofhealthcareservicesandthereimbursementpaidforsuchservicesbythegovernmentorotherthirdpartypayors,includingreformsresultingfromthe PatientProtectionandAffordableCareActandtheHealthcareEducationandReconciliationAct(collectively,theACA).HealthcarereformisaffectingcertainoftheCompanysbusinessesandtheCompanyexpectsthatitwill impactalloftheminsomemanner.Thereisalsothepossibility thatimplementationoftheprovisionsexpandinghealthinsurancecoverageortheentireACAwillbedelayed,revisedoreliminatedasaresultofcourtchallengesand effortstorepealoramendthelaw.TheU.S.SupremeCourthasheardoralargumentontheconstitutionalityoftheACAandisexpectedtoreachadecisionin2012.Thesecourtproceedings,the 2012presidentialelectionand pendingeffortsintheU.S.Congresstorepeal,amendorretract fundingforvariousaspectsoftheACAcreateadditionaluncertaintyabouttheultimateimpactoftheACA,oranyportionsoftheACAthatsurvivetheconstitutional challenge,ontheCompanyandthehealthcareindustry.DuetothesubstantialregulatorychangesthatwillneedtobeimplementedbytheCentersforMedicareandMedicaidServices(CMS)andothers,thenumerousprocesses requiredtoimplementthesereforms,andpendingjudicialreview oftheACA,theCompanycannotpredictwhichhealthcareinitiativeswillbeimplementedatthefederalorstatelevel,thetimingofanysuchreforms,ortheeffect suchreformsoranyotherfuturelegislationorregulationwillhaveontheCompanysbusiness,financialposition,resultsofoperationsandliquidity,(b)theimpactoftheproposedrulesissuedbyCMSonApril 24,2012which, amongotherthings,wouldreduceMedicarereimbursementtotheCompanyslongtermacutecare(LTAC)hospitalsin2013andbeyondbyimposingabudgetneutralityadjustmentandmodifyingtheshortstayoutlierrules,(c) theimpactoffinalrulesissuedbyCMSonJuly29,2011whichsignificantlyreducedMedicarereimbursementtonursingcentersandchangedpaymentsfortheprovisionofgrouptherapyserviceseffectiveOctober 1,2011,(d)the impactoftheBudgetControlActof2011whichwillautomaticallyreducefederalspendingbyapproximately$1.2trillionsplitevenlybetweendomesticanddefensespending.Atthistime,theCompanybelievesthiswillresultinan automatic2%reductiononeachclaimsubmittedtoMedicarebeginningFebruary 1,2013,(e)changesinthereimbursementratesorthemethodsortimingofpaymentfromthirdpartypayors,includingcommercialpayors andthe MedicareandMedicaidprograms,changesarisingfromandrelated totheMedicareprospectivepaymentsystemforLTAChospitals,includingpotentialchangesintheMedicarepaymentrules,theMedicarePrescriptionDrug, Improvement,andModernizationActof2003,andchangesinMedicareandMedicaidreimbursementsfortheCompanysLTAChospitals,nursingandrehabilitationcenters,inpatientrehabilitationhospitalsandhomehealthand hospiceoperations,andtheexpirationoftheMedicarePartBtherapycapexceptionprocess,(f)theeffectsofadditionallegislativechangesandgovernmentregulations,interpretationofregulationsandchangesinthenatureand enforcementofregulationsgoverningthehealthcareindustry,(g)theimpactoftheMedicare,MedicaidandSCHIPExtensionActof2007(whichwasextendedbytheACA),includingtheabilityof theCompanyshospitalstoadjust topotentialLTACcertification,medicalnecessityreviewsandthemoratoriumonfuturehospitaldevelopment,(h)theimpactoftheCompanyssignificantlyincreasedlevelsofindebtednessasaresultoftheRehabCareGroup,Inc. acquisitionontheCompanysfundingcosts,operatingflexibilityandabilitytofundongoingoperations,developmentcapitalexpendituresorotherstrategicacquisitionswithadditionalborrowings,(i)theCompanysabilityto successfullypursueitsdevelopmentactivities,includingthroughacquisitions,andsuccessfullyintegratenewoperations,includingtherealizationofanticipatedrevenues,economiesofscale,costsavingsandproductivitygains associatedwithsuchoperations,asandwhenplanned,includingthepotentialimpactofunanticipatedissues,expensesandliabilitiesassociatedwiththoseactivities,(j)thefailureoftheCompanysfacilitiestomeetapplicable licensureandcertificationrequirements,(k)thefurtherconsolidationandcostcontainmenteffortsofmanagedcareorganizationsandotherthirdpartypayors,(l)theCompanysabilitytomeetitsrentalanddebtservice obligationsanditsotherobligationsundertherelatedagreements,(m)theconditionofthefinancialmarkets,includingvolatilityandweaknessintheequity,capitalandcreditmarkets,whichcouldlimittheavailabilityandtermsof debtandequityfinancingsourcestofundtherequirementsoftheCompanysbusinesses,orwhichcouldnegativelyimpacttheCompanysinvestmentportfolio,(n)nationalandregionaleconomic,financial,businessandpolitical conditions,includingtheireffectontheavailabilityandcostoflabor,credit,materialsandotherservices,(o)theCompanysabilitytocontrolcosts,particularlylaborandemployeebenefitcosts,(p)increasedoperatingcostsdue toshortagesinqualifiednurses,therapistsandotherhealthcarepersonnel,(q)theCompanysabilitytoattractandretainkeyexecutivesandotherhealthcarepersonnel,(r)theincreaseinthecostsofdefendingandinsuring againstallegedprofessionalliabilityandotherclaimsandtheCompanysabilitytopredicttheestimatedcostsrelatedtosuchclaims, includingtheimpactofdifferencesinactuarialassumptionsandestimatescomparedtoeventual outcomes,(s)theCompanysabilitytosuccessfullyreduce(bydivestitureofoperationsorotherwise)itsexposuretoprofessionalliabilityandotherclaims,(t)theCompanysabilitytosuccessfullydisposeofunprofitablefacilities, (u)eventsorcircumstanceswhichcouldresultintheimpairment ofanassetorothercharges,suchastheimpactoftheMedicarereimbursementregulationsthatresultedintheCompanyrecordingsignificantimpairmentcharges in2011,(v)changesingenerallyacceptedaccountingprinciples orpractices,andchangesintaxaccountingortaxlaws(orauthoritativeinterpretationsrelatingtoanyofthesematters),and(w)theCompanysabilitytomaintainan effectivesystemofinternalcontroloverfinancialreporting.ManyofthesefactorsarebeyondtheCompanyscontrol.TheCompanycautionsinvestorsthatanyforwardlookingstatementsmadebytheCompanyarenot guaranteesoffutureperformance.TheCompanydisclaimsanyobligationtoupdateanysuchfactorsortoannouncepubliclytheresultsofanyrevisionstoanyoftheforwardlookingstatementstoreflectfutureeventsor developments. Theinformationbeingprovidedtodayisasofthisdateonlyand Kindreddisclaimsanyobligationtoupdateanysuchfactorsortoannouncepubliclytheresultsofanyrevisionstoanyoftheforwardlookingstatementstoreflect futureeventsordevelopments.AdditionalinformationconcerningKindred,includingourSECfilingsandacopyofthispresentation,isavailableonourwebsitewww.kindredhealthcare.com,undertheheadingInvestors. ReconciliationofnonGAAPFinancialMeasures TheappendixtothispresentationandourwebsitealsoincludereconciliationsofanynonGAAPfinancialmeasureswementioninourpresentationstotheir correspondingGAAPmeasures.Thereconciliationsonourwebsitemay befoundatwww.kindredhealthcare.com undertheheadingInvestors.

KINDREDHEALTHCARE ContinuetheCare

PremierProviderofRehabilitationServices andPostAcuteCareintheUnitedStates
$6.5billiontotalrevenues(1) 2,142locations,450facilitiesin46states(2) 61,800patientsandresidentsperday(2) 76,000dedicatedemployees(2)

Business Mix(1)

20%
($1.3billion)

44%
($2.9billion)

RehabCare

1%
($0.1billion)

Revenue 15% ($1.0billion) Mix(1) Business


toBusiness

40%
($2.6billion)

LTAC/IRF Hospitals

35%
($2.2billion)

Home Health

28%

Skilled Nursing Centers


(1)ProformarevenuesforthetwelvemonthsendedMarch31,2012(before intercompanyeliminations). (2)AsofMarch31,2012.

($1.8billion) Commercial Insurance/ Private 17% ($1.1billion)

Medicare

Medicaid

KINDREDHEALTHCARE ContinuetheCare

LeadingDiversifiedPostAcuteProvider
WithFocusonDevelopingClusterMarketServiceOfferings

LTAC Hospitals (120) Inpatient Rehabilitation Hospitals (6) Hospital-Based Acute Rehab Units (100) Nursing and Rehabilitation Centers (224) RehabCare Total Sites of Service (2,082) Home Health and Hospice (52) Existing Cluster Market (13) Potential Cluster Market (7)
As of March 31, 2012

KINDREDHEALTHCARE ContinuetheCare

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KindredsValueProposition/StrategicOpportunity andourContinue The Care Campaign


Bealeaderinhelpingtocoordinateanddeliverhighqualitycareatthe lowestcost(particularlyforthosepatientswhoarethehighestusersofhealthcare
services)

Toprovidesuperiorclinicaloutcomesinthemostappropriatesetting,withan approachwhichispatientcentered,disciplinedandtransparent Totransitionpatientshomeatthehighestpossibleleveloffunctionand wellnessandpreventavoidablerehospitalizations

Lowerhealthcarecostsbyreducinglengthsofstayinacutecare hospitals
(andthroughoutanepisodeofcare)

Participateinthedevelopmentofnewcaredeliveryandpaymentmodels
Tobettercoordinatecareandmanagepatientswithchronicconditions, includingthedualeligibles Toreduceavoidablerehospitalizationswithourpartnersthrough our integratedcaremanagementteamsandprotocols

KINDREDHEALTHCARE ContinuetheCare

DeliveringonQuality,ValueandInnovationinPatientCareDelivery

KindredHealthcare

KINDREDHEALTHCARE ContinuetheCare

DeliveringonQuality,ValueandInnovationinPatientCareDelivery

KindredHealthcare

KINDREDHEALTHCARE ContinuetheCare

HospitalDivision
$2.9billionRevenues(1) $540millionOperatingIncome(2)
LongTermAcuteCareHospitals(LTACs) 120LTAChospitals(3) 8,510licensedbeds(3) InpatientRehabilitationHospitals(IRFs) 6IRFs(3) 229licensedbeds(3) Consistentlyoutperformsnationalbenchmarksonkey qualityindicators InQ12012,samestoreadmissiongrowthof2%resultedin operatingincomemarginimprovementto21.0% Q12012operatingincomegrew48%to$161millionversus lastyear(2) withsuccessfulintegrationof36RehabCare Hospitals PortfolioUpdate
OpenedSeattleFirstHillinFebruary2012with50LTACbedsand 30subacutebeds OpenedHumble,TXfreestandingIRF inFebruary2012,with46beds OpenedAustin,TXfreestandingreplacementIRFinMay2012,whichadded 30additionalbeds ExpecttoopenDayton,OHandCharleston,SCreplacementLTAChospitals inQ32012,whichwilladd126LTACand72subacutelicensedbeds CompanyenteredintonewleasewithVentas for10hospitalsoriginallyset toexpirein2013

Revenue Mix(1)

Insurance/Other Medicare

32%
$0.9 billion

61%
$1.8 billion

Medicaid

7%
$0.2 billion

(1) (2) (3)

ProformarevenuesforthetwelvemonthsendedMarch31,2012(divisional revenuesbeforeintercompanyeliminations). OperatingincomeforthetwelvemonthsendedMarch31,2012. AsofMarch31,2012.

140 120 100 80 60 40 20 0

126

119 100

#1 Operator of Long-Term Acute Care Hospitals and Inpatient Rehabilitation Facilities

22

20

19

18

KINDREDHEALTHCARE ContinuetheCare

NursingCenterDivision
$2.2billionRevenues(1) $317millionOperatingIncome(2)
37TransitionalCareCenters(TCCs)(3) 95NursingandRehabilitation Centers(withTCUs)(3) 92SkilledNursingCenters(TraditionalSNFs)(3) ChallengingoperatingenvironmentundernewRUGs IVrulesandongoingMedicaidratepressures PortfolioUpdate CompanywillallowVentas leasesfor54non strategicnursingcenterstoexpireinApril2013 Qualityperformanceranks1st amonglargeproviders onsurveysandnationalbenchmarksinkeyareas Q112admissiongrowthof1%offsetbyincreasing dischargestohomeanddeclininglengthofstay

Revenue Mix(1)

Private/Other Medicaid

26%
$0.6 billion

39%
$0.8 billion

Number of Facilities

Medicare

35%
$0.8 billion

(1) (2) (3)

RevenuesforthetwelvemonthsendedMarch31,2012(divisionalrevenuesbefore intercompanyeliminations). OperatingincomeforthetwelvemonthsendedMarch31,2012. AsofMarch31,2012.

350 300 250 200 150 100 50 0

324 277

#4 Operator of Skilled Nursing and Rehabilitation Centers

227

224

223

207

KINDREDHEALTHCARE ContinuetheCare

$1.3billionRevenues(1) $125millionOperatingIncome(2)
2,082sitesofserviceservedthrough 8,760therapists(3) Including100hospitalbasedacute rehabilitationunits(3)

Providesacompellingvaluepropositiontoour Hospital(HRS)andSkilledNursing(SRS)partners throughadvancedtechsystems,clinicalprograms andhighlytrainedtherapistteam SuccessfullyintegratingSRSandHRSbusinessesfrom theRehabCareacquisition Operatingmarginsimprovedto9.2%inQ112from 8.8%inQ411 HRS=8signedandopenedthroughMay2012 SRS=91signedand74openedthroughMay2012

Business Mix(1)

22%
$0.3 billion

2,500 2,000
HRS SRS

2,082 360 1,722 1,000 300 700

#1 Contract Rehab Manager

1,500 1,000 500 0

Third Party

Affiliated

78%
$1.0 billion

900 200 700

471 471

450 108 342

(1) (2) (3)

ProformarevenuesforthetwelvemonthsendedMarch31,2012(divisional revenuesbeforeintercompanyeliminations). OperatingincomeforthetwelvemonthsendedMarch31,2012. AsofMarch31,2012.

KINDREDHEALTHCARE ContinuetheCare

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$114millionAnnualizedRevenues(1)
52sitesofservice 34inKindredsClusterMarkets 2,200employeesserving5,400patients onadailybasis

Buildingmanagementteam,includingsales, clinicaloperationsandITcapabilitiesto supportacceleratedexpansion Q1Revenuesof$28Million DevelopmentUpdate ProfessionalAcquisition 27locations(September11) SynergyHomeHealthAcquisition 2locations(October11) ActivepipelineofopportunitiesinKindred ClusterMarkets In2012,wehaveopened10newbranch locationswithplanstoopenanother11 locationsbeforetheendoftheyear.

Business Mix
1%

Revenue Mix(1)
8% 28%

10% 59% 30%

64%
DME PrivateDuty Hospice HomeHealth Medicaid ($10million) Medicare ($72million) Commercial Insurance/ Other ($32million)

(1)

AnnualizedbaseduponrevenuesforthethreemonthsendedMarch31,2012 (divisionalrevenuesbeforeintercompanyeliminations)duetorecentacquisitions.

KINDREDHEALTHCARE ContinuetheCare

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TremendousOpportunitiesExisttoBetterManagePatient CareforPatientsDischargedFromAcuteCareHospitals
Currentlythereare47.6millionMedicarebeneficiarieswithanestimated7,000 individualsaddedtotheprogrameachday.*
35%ofMedicareBeneficiariesareDischargedfromAcuteHospitalstoPostAcuteCare

MedicarePatients UseofPostAcuteServicesThroughoutanEpisodeofCare (1)


Higher IntensityofService Lower

SHORTTERM ACUTECARE HOSPITALS

LONGTERM ACUTECARE HOSPITALS

INPATIENT REHAB

SKILLED NURSING FACILITIES

OUTPATIENT REHAB

HOME HEALTH CARE

Patients first siteof dischargeafteracute carehospitalstay


Patients useofsite duringa90day episode
(1)

2% 2%

10% 11%

41% 52%

9% 21%

37% 61%

Source:RTI,2009:ExaminingPostAcuteCareRelationshipsinanIntegratedHospitalSystem

*Source:KaiserFamilyFoundation,2011statehealthfacts.org,andAARP2011projections

KINDREDHEALTHCARE ContinuetheCare

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KindredIsPositionedtoHelpDeterminethe MostAppropriateCareSettingForPatientsasthey Continue Their Care Throughout aPostAcuteEpisode


PatientsDischargedFromKindred LTACHospitals PatientsDischargedfrom KindredHospitalBasedIRFs PatientsDischargedfrom KindredNursingand RehabilitationCenters

36%
Skilled Nursing and Rehab Centers

28%
Home

5%
Inpatient Rehab Facility

77%
Home

13%
Skilled Nursing and Rehab Centers

52% Home
33%with Home Health

18%with Home Health

47%with Home Health

(1)

Source:KindredInternalData,2011data.

KINDREDHEALTHCARE ContinuetheCare

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PositionedtoTakeAdvantageofChanging HealthcareLandscape
UniquelyPositionedForBundledOrEpisodicPaymentEnvironment

Continue The Care


ACUTECARE HOSPITALS Patient Service Intensity LTACs
SAU TRANS CARE ICU

INPATIENT REHAB

FREESTANDING/HIH

OUTPATIENT REHAB

SKILLED NURSING FACILITIES


HOME HEALTH CARE ASSISTED LIVING

TCC & TCU

HOSPICE

ADULTDAY CARE

HOME
Patient Illness Severity KINDREDHEALTHCARE ContinuetheCare 14

ClusterMarketStrategy
DesignedToImproveCareCoordinationandDriveAdmissionsGrowth

Astrategytopositionassets/service linesanddeploycapitaltotake advantageofanincreasingly integratedhealthcaredelivery system Diversepostacuteservicelines andclinicalprogramstosupporta continuumofcarewithinanACOor abundledpaymentenvironment Strengthenlinkageswithacute hospitals,managedcarepayors, andphysiciansacrosssettings
Potentialbenefitsincludeimproved carecoordination,reduced rehospitalizations,lowercosts andadmissionsgrowth

KINDREDHEALTHCARE ContinuetheCare

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BusinessStrategy
SuccessintheCore
Takecareofourteammatesandpromoteperformanceimprovement Continuetoimprovequalityandclinicaloutcomes Promoteourvaluepropositionandgrowadmissionsandrehabcontracts ExecuteonRehabCaresynergiesandothercostreductioninitiatives

AccelerateourClusterMarket(NetworkDevelopment)Strategy
Developservicelinesandintegratedcaremanagementcapabilitiesacross thecarecontinuum Expandandintegratehealthsystem,physicianandmanagedcarerelationships ContinuetoinvestinIT(electronichealthrecord)linkages

AggressivelyexpandHomeHealthandHospiceServices RedeployFreeCashFlow,Assets,andManagementTimetoHigherMarginGrowth BusinessesasVentas leasesexpire


Homehealth/hospicebusinesses,hospitalsandtransitionalcarecenters(TCCs)orsubacutefacilities

ParticipateandInvestinNewIntegratedCareandPaymentModels/Businesses, includingACOs andBundledPaymentDemoswithHealthSystems,PhysicianGroups and ManagedCarePayors

KINDREDHEALTHCARE ContinuetheCare

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FinancialUpdate

KINDREDHEALTHCARE ContinuetheCare

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FinancialHighlightsQ12012
Solidstarttotheyearreflectingoperationalstabilization Revenuesgrew33%to$1.6billionfromQ12011
RehabCareacquisitionadded$364millioninrevenues

Excludingcertainitems,Q1dilutedEPSwas$0.40vs.$0.27 inQ42011 Managementtargets$124millionincostreduction measuresin2012


RehabCareacquisitionsynergies $70million Operatingdivisionreorganizations $34million Enterprisecostreductions $20million

KINDREDHEALTHCARE ContinuetheCare

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OperationalHighlights Q12012
HospitalresultsbolsteredbyRehabCareacquisition,volumegrowth andcostefficiencies
Admissionsgrewby40%fromlastyear,samefacilityadmissionsgrew2% Operatingincomegrew48%to$161million

Despitegrowthinnursingcenteradmissionsandimprovedcostmanagement, reimbursementpressuresanddecreasinglengthsofstayresultedinoperating incomedeclines WhilerecentMedicarechangesimpairedtherehabilitationdivisions operatingmarginscomparedtolastyear,operatingmarginsimprovedfrom 8.8%inQ42011to9.2%inQ12012 Homehealthandhospicedivisionreportedrevenuegrowthof254% and operatingincomegrewto$2.3millionfrombreakevenayearago

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OperatingMargins

Significant LTAC margin improvement was more than offset by regulatory changes in Nursing Center and RehabCare businesses.
KINDREDHEALTHCARE ContinuetheCare 20

RegulatoryUpdate
OnApril24th,CMSpublishedproposedratesforLTAChospitalsforthefiscalyear beginningOctober1,2012 CMSprojectsLTACspendingtoincreaseby1.9%.Basedonourreviewofthe proposedrule,weexpectLTACMedicarepaymentrateswillbeflatin2013 comparedtocurrentrates.Theproposedruledoesnotincludetheimpactofa2% sequestrationpaymentreductionmandatedbyCongressthatisexpectedtobegin inFebruary2013. Theproposedrulealsowould:
Beginathreeyearphaseinofa3.75%budgetneutralityadjustmentwhichwouldreduce ratesby1.3%in2013 Restoreapaymentreductionforveryshortstayoutliers(0.5%reductionin2013) Provideaoneyearextensionofthemoratoriumofthe25%Rule pendingtheresultsof ongoingresearchtobetterdefinetheroleandcriteriaforLTAC hospitalsintheMedicare program Allowfortheexpirationofthemoratoriumonthedevelopmentor expansionofLTAC hospitals

MedicarerateupdatesareexpectedinAugustforinpatientrehabilitationfacilities andnursingcenters,signalingarespitefromthesignificantregulatorychangesthat haverecentlyaffectedournursingcenterandrehabilitationservicesbusinesses


KINDREDHEALTHCARE ContinuetheCare 21

EarningsGuidanceRanges Fiscal2012*
(Inmillions,exceptpershareamounts)
As of May 1, 2012 Low High Revenues Operating income Income from continuing operations before income taxes Available to common stockholders Earnings per diluted share Operating cash flows Routine capital expenditures $ 6,300 868 130 71 1.35 240 130 $ 6,300 884 146 81 1.55 260 140

* The Company's earnings guidance excludes the effect of (1) any costs associated with the closing of a regional office and a LTAC hospital, (2) any transaction-related charges, (3) any other reimbursement changes, (4) any acquisitions or divestitures, (5) any impairment charges, or (6) any repurchases of common stock.

KINDREDHEALTHCARE ContinuetheCare

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ImprovedFinancialFlexibility
Financingarrangementsprovidehighercapacityat favorableterms
$219millionofrevolvingcreditcapacityavailableatMarch31 Favorablepricinginplaceforbothsecuredandunsecured financing Financialcovenantssupportoperationalflexibility
Q1fixedchargecoveragewas1.68vs.1.25covenantlevel Q1adjustedleveragewas4.69vs.6.00covenantlevel Operatingincomecushiontotalednearly$200millionatMarch31

Extendedtenorofagreements
Revolvingcredit 2016 Termloan 2018 Unsecurednotes 2019

KINDREDHEALTHCARE ContinuetheCare

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Ventas Leases
Kindredrecentlyannouncedthatithadenteredintoanew10year leaseagreementwithVentas for10LTAChospitalswhoseleaseterm wassettoexpireinApril2013 Theagreementalsoprovidesbothcompaniesmoreflexibilityto acceleratethetransferofthe54nursingcenterswhoseleasesexpire April2013andwillnotberenewed Thefinancialeffectin2013ofenteringintothenewleasealongwith thenonrenewalofthe54nursingcentersisexpectedtobeslightly accretivetoKindredsconsolidatedearningspershare

KINDREDHEALTHCARE ContinuetheCare

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StrategicCapitalAllocationFramework
FRAMEWORK CONSIDERATIONS

Investinhighermarginandlesscapital intensivebusinessesprimarilyinCluster Markets

Investinbusinessesthathavegoodorganicgrowth characteristics Establishedrangeofinvestmentreturnsforeachasset class Provideshighermarginsandoperationalflexibility

Ownmoreofourownrealestate

Allowsdeleveragingthroughfreecashflow Removesincreasingrentpayments Enterleasesonaselectivebasis ContinueassetreplacementplaninourClusterMarkets

PaydowndebtincurredinRHB acquisition

Reduceadjustedleverageovertime

KINDREDHEALTHCARE ContinuetheCare

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CapitalInvestmentComparison
$0.250

Home Health & Hospice $0.200 DeNovo LTAC/IRF Hospital (Owned) EPS / $100M Spend

$0.150 LTAC/IRF Hospital Cluster Market Acquisition

SNF Cluster Market Acquisition

$0.100

Real Estate Purchase

Debt Reduction - Revolver

$0.050

$0.000 12x 10x 8x 6x 4x 2x 0x Acquisition/Development Multiple (Stabilized Enterprise Value / EBITDAR)

KINDREDHEALTHCARE ContinuetheCare

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InvestmentRationale
Eachyear,nearly9millionpeople 24,000aday aredischargedfrom shorttermacutecarehospitalsandrequiresomeformofpostacute care Asthelargestdiversifiedpostacuteprovider,Kindredisuniquely positionedtogrowandsucceedinwhatwillbeanincreasingly integratedhealthcaredeliverysystem Kindredhasatrackrecordofprovidingquality,costeffectivecare, operationalexcellenceandconsistentlevelsoffreecashflows Ourexperiencedmanagementteam,robusttechnologyplatform,and demonstratedabilitytoadapttochange,togetherwithoursuccessful organicdevelopmentstrategy,offerthepotentialforcreatingsignificant valueforshareholdersovertime

KINDREDHEALTHCARE ContinuetheCare

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KINDRED HEALTHCARE
NYSE:KND

InvestorPresentation June2012

KINDREDHEALTHCARE ContinuetheCare

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Appendix

KINDREDHEALTHCARE ContinuetheCare

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ConsolidatedBalancedScorecard
March2012YTD Performanceasmeasuredagainst2012goals
EBITDARM
35%

EBITDAM

People
10% TotalEmployee Turnover

Quality& Service
15%

Growth
15%

Efficiency
10%

Capital
10%

Organizational Excellence
5%

HospitalDivision

HospitalDivision

HospitalDivision

A/RDays

HospitalDivision

NursingCenter Division

NursingCenter Division

NursingCenter Division

NursingCenter Division

RehabCareDivision

RehabCareDivision

RehabCareDivision

RehabCareDivision

Legend MaximumAchieved BetweenMaximum&Target BetweenTarget&Minimum BelowMinimum NotMeasuredforPeriod

PeopleFirst Division

PeopleFirst Division

PeopleFirst Division

PeopleFirst Division

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HospitalDivision BalancedScorecard
March2012YTD STIPMeasures
EBITDARM
30%

EBITDAM Organizational Excellence


5%

People
10%

Quality&Service
15%

Growth
15%

Efficiency
15%

Capital
10%

ShortTermIncentive Plan

TotalEmployee Turnover% CCOTurnover%

ClinicalQualityIndex CustomerService Index ClearConditionOut onFirstFollowup

Admissions AverageDaily Census NetRevenuePPD

OperatingCostPPD Revenue/Cost GrowthRatio

ARDays (NonMedicare)

Rehospitalization Rate Worker'sComp ClaimsperFTE

Legend MaximumAchieved BetweenMaximum&Target BetweenTarget&Minimum BelowMinimum NotMeasuredforPeriod

KINDREDHEALTHCARE ContinuetheCare

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NursingCenterDivision BalancedScorecard
March2012YTD STIPMeasures

EBITDARM
30%

EBITDAM Organizational Excellence


5%

People
10%

Quality&Service
15%

Growth
15%

Efficiency
15%

Capital
10%

ShortTerm IncentivePlan

Employee Turnover% Employee Retention%

AverageDeficiency Index ClearingTagson FirstFollowup Rehospitalization Rate

AverageDaily Census TotalAdmissions Gov'tNetRevenue PPD

TotalOperating ExpensePPD TotalAncillary ExpensePPD

A/RDays

Implementationof PointClickCare Implementationof Interact Implementationof Abaqis,Phase2

Legend MaximumAchieved BetweenMaximum&Target BetweenTarget&Minimum BelowMinimum NotMeasuredforPeriod

KINDREDHEALTHCARE ContinuetheCare

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RehabCareDivision BalancedScorecard
March2012YTD STIPMeasures
EBITDARM
30%

EBITDAM Organizational Excellence


5%

People
10%

Quality&Service
10%

Growth
20%

Efficiency
15%

Capital
10%

ShortTermIncentivePlan

Employee Turnover%

Customer Satisfaction SRSOutcomes Measurement HRSOPOutcomes HRSIRFFIMGain HRSLTACHFOM Gain

TotalRevenue NetNew Contracts SRSRevenuePer Minute

ContributionMargin % SRSCostPerMinute

DaysSales Outstanding

ClinicalProgram Implementation

Legend MaximumAchieved BetweenMaximum&Target BetweenTarget&Minimum BelowMinimum NotMeasuredforPeriod

KINDREDHEALTHCARE ContinuetheCare

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PeopleFirstHomeHealth &HospiceDivision BalancedScorecard


March2012YTD STIPMeasures

EBITDARM
45%

EBITDAM Organizational Excellence


5%

People
ShortTermIncentive Plan
7.5%

Quality&Service
7.5%

Growth
17.5%

Efficiency
7.5%

Capital
10%

Employee Turnover

OutcomeMeasures ExceedAverages

TotalAdmissions AverageDaily Census TotalBilledHours

CaseloadperFTE

ARDays

PatientSatisfaction

Legend MaximumAchieved BetweenMaximum&Target BetweenTarget&Minimum BelowMinimum NotMeasuredforPeriod

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ReconciliationofNonGAAPMeasures
(Inmillions)
Year ended Decem ber 31, 2008 2009 2010 First Quarter 2011 First Quarter 2012

2007 Incom e (loss) from continuing operations: Operating income (loss): Hospital division $ Nursing center division Rehabilitation division Home health and hospice division Pharmacy division Corporate: Overhead Insurance subsidiary Impairment charges Transaction costs Operating income Rent Depreciation and amortization Interest, net Income (loss) from continuing operations before income taxes Provision (benefit) for income taxes $

2011

365 295 34 18

346 322 39 (1) -

364 305 52 (1) -

360 304 53 -

488 338 110 3 -

108 87 15 -

161 66 30 2 -

(168) (7) (175) 537 (338) (118) (1) 80 37 43

(133) (7) (140) 566 (339) (120) (8) 99 39 60

(135) (6) (141) 579 (348) (126) (3) 102 39 63

(134) (3) (137) (5) 575 (357) (122) (6) 90 34 56

(175) (2) (177) (129) (51) 582 (399) (166) (80) (63) (7) (56)

(38) (1) (39) (4) 167 (91) (33) (5) 38 16 22

(43) (43) (1) (1) 214 (108) (49) (26) 31 13 18

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ReconciliationofNonGAAPMeasures(Continued)
(Inmillions,expectpershareamounts)
Three months ended March 31, 2012 2011 Detail of charges: Severance and other miscellaneous costs Lease cancellation charge Transaction costs Loss on hospital divestiture Impairment charges Financing costs (in connection with RehabCare acquisition) Income tax benefit Charges net of income taxes Allocation to participating unvested restricted stockholders Available to common stockholders Weighted average diluted shares outstanding Diluted loss per common share related to charges Reconciliation of income from continuing operations before charges: Income from continuing operations before charges Charges Reported income (loss) from continuing operations ($2) (2) (1) (5) 2 (3) ($3) 51.6 ($0.05) (4) (2) (6) 2 (4) ($4) 39.5 ($0.10) Three months ended December 31, 2011 ($1) (2) (4) (2) (102) (111) 24 (87) ($87) 51.3 ($1.69)

$21 (3) $18

$26 (4) $22

$14 (87) ($73)

Reconciliation of diluted earnings per common share from continuing operations before charges: Diluted earnings per common share before charges (a) $0.40 Charges (0.05) Reported diluted earnings per common share $0.35
(a)

$0.65 (0.10) $0.55

$0.27 (1.69) ($1.42)

(a) For purposes of computing diluted earnings per share, income from continuing operations before charges was reduced by $0.3 million, $0.5 million
and $0.2 million for the three months ended March 31, 2012, March 31, 2011 and December 31, 2011, respectively, for the allocation of income to participating unvested restricted stockholders.

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KINDRED HEALTHCARE
NYSE:KND

InvestorPresentation June2012

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