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PRESENTED BY:

Paul J. Diaz, Chief Executive OfficerBenjamin A. Breier, President and Chief Operating Officer

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Our Mission

Kindred Healthcare’s mission is to promote healing, provide hope, preserve dignity and

produce value for each patient, resident, family member, customer, employee and

shareholder we serve.

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Transitional Care Hospitals (117)Inpatient Rehabilitation Hospitals (6)Hospital-Based Acute Rehab Units (104)Nursing and Rehabilitation Centers (224)RehabCare Total Sites of Service (2,104)Home Health, Hospice and Private Duty (102)Regional Support Centers

Existing Integrated Care Market (12)

Potential Integrated Care Market (9)

As of September 30, 2012

Leading Diversified Post-Acute ProviderWith a Focus on Developing Integrated Care Market Capabilities

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Kindred’s Value Proposition/Strategic Opportunity and our “CONTINUE THE CARE” Campaign

• Be a leader in helping to coordinate and deliver high quality care at the lowest cost (particularly for those patients who are the highest users of healthcare services)

– By providing superior clinical outcomes in the most appropriate setting, with an approach which is patient-centered, disciplined and transparent

– By transitioning patients home at the highest possible level of function and wellness, therefore preventing avoidable rehospitalizations

• Lower healthcare costs by reducing lengths-of-stay in acute care hospitals and throughout an episode of care

• Participate in the development of new care delivery and payment models– To better coordinate care and manage patients with chronic conditions, including

the dual-eligibles– To reduce avoidable rehospitalizations with our partners through our integrated

care management teams and protocols

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Kindred HealthcareDelivering on Quality, Value and Innovation in Patient Care Delivery

527,000patients and residents were cared for by Kindred across the post-acute continuum – 2012 annualized.

Patient and Family Satisfaction92% of our patients, residents and families indicate they would recommend Kindred again.

Outperforming National Quality BenchmarksKindred Transitional Care Hospitals, Nursing and Rehabilitation Centers and PeopleFirst Homecare and Hospice continued to improve key quality indicators and beat industry benchmarks through mid-2012.

Sending More Patients Home…From 2008 to mid-2012, Kindred Nursing and Rehabilitation Centers have discharge 18% more patients home – with nearly 53% of patients discharged home in 2012 after an average stay of 30 days.

From 2008 through mid-2012, we have reduced the total average length of stay in our Hospitals by 8.5%, and in our Nursing and Rehabilitation Centers by 26%.

Kindred Transitional Care Hospitals reduced rehospitalization rates by more than 16% from 2008 to mid-2012 (down to 11.2%) and our Nursing and Rehabilitation Centers have reduced rehospitalizations by 10% over the same time period to 17.8%.

… and More Quickly…(Reducing Average Length‐of‐Stay)

… Reducing Rehospitalization

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Hospital Quality Data

4.52 4.474.19

4.59 4.564.34

0

1

2

3

4

5

Overall Care PainManagement

Call LightResponse

20062012

1.8

1.3

2.2

1.49

0.71

1.1

1.97

0.99

0

0.5

1

1.5

2

2.5

Ventilator-AssociatedPneumonia

Line-Related BloodStream Infection

Catheter AssociatedUrinary Tract Infection

Pressure Wounds

Kindred Exceeds National Benchmarks on Many Key Quality Indicators (Lower is better)

Kindred 2012 Kindred 2006

Patient/Family Satisfaction Scores(1 = Poor, 5 = Excellent)

National Benchmark

As of September 30, 2012

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Nursing and Rehabilitation Centers Survey Quality Outcome Ranking Report June 2012

Ranking based on the following 8 standard survey measures:1. Average # Deficiencies2. Average # Deficiencies adjusted for state

variation3. Percent facilities with “Serious” deficiencies4. Percent facilities with “Serious” deficiencies

adjusted for state variation5. Percent facilities with “substandard care”6. Percent facilities with “substandard care”

adjusted for state variation7. Percent “deficiency free” facilities8. Percent “deficiency free” facilities adjusted

for state variation1211.00Skilled Healthcare Group

1110.38Lavie

109.88Sava Senior Care

98.13Life Care Centers of America

86.75Sun Healthcare Group

76.38Extendicare

66.00HCR Manor Care

55.13Fundamental Clinical Consulting

44.50Good Samaritan Society

34.25Golden Living

23.13Genesis Healthcare

12.50Kindred Healthcare

RankAverage RankSelected Corporations Kindred ranked # 1 in Quality 6 consecutive quarters

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Kindred Nursing and Rehabilitation Centers Outperform National Benchmarks on Many Key Survey Quality Outcomes

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27.22

3.09

9.36

5.89

19.55

1.36

10.45

0

5

10

15

20

25

30

Total HealthDeficiencies -

Average

Percent SevereDeficiencies (%)

Percent SubstandardCare Deficiencies (%)

Percent ZeroDeficiencies (%)

NationKindred

As of September 30, 2012

(Higher is Better!)(Lower is Better!)(Lower is Better!)

(Lower is Better!)

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Inpatient Rehabilitation HospitalsExceeding National Benchmarks

26.4925.51

0

5

10

15

20

25

30

FIM Gain

2.57

2.3

0

0.5

1

1.5

2

2.5

3

FIM Efficiency

76.01 74.22

0

20

40

60

80

Discharge to Community

Kindred Inpatient Rehabilitation Hospitals National Average

As of September 30, 2012

(Higher is better)

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RehabCareIncrease (%) in Functional Outcomes From Admission to Discharge

5256

51.646.8

50.6

65.2

51.5

0

10

20

30

40

50

60

70

Stroke PulmonaryCardiac

Wound BrainDysfunction

Neurological Orthopedic Other

As of September 30, 2012

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PeopleFirst Homecare and Hospice Exceeding National Benchmarks

98 98

65

939998 98

63

8998

0

20

40

60

80

100

How OftenChecked for Pain

How OftenTreated for Pain

How OftenBreathingImproved

How Often WoundImproved or

Healed Post-Op

How OftenChecked for Risk

of PressureSores

PeopleFirst Homecare and HospiceNational Benchmark

9893 93

99

25

9691 91 95

26

0

20

40

60

80

100

How OftenTreated to

Prevent PressureSores

How Often CareBegan in a Timely

Manner

How OftenPatient/FamilyTaught aboutMedication

How oftenChecked for Risk

of Falling

How OftemPatients Admittedto Hospital (lower

is better)

(Higher is better)

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Vivi’s Story

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CONTINUE THE CAREAdvancing Our Integrated Care Strategy

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Patient SatisfactionQuality and Clinical OutcomesCare Coordination across Sites of CareReduce Hospital Readmissions

Why Post-Acute Care is an Important Part of the Evolving Healthcare Marketplace

Aging DemographicsPost‐Acute Utilization is increasingIncreasing Incidence of Chronic DiseaseImperative to get Patients Home more quickly and to Coordinate Delivery of Care Through a Full Episode

Demographics and Demand for 

Post‐Acute Services are Growing

Value‐Based PurchasingReadmission PenaltiesEpisodic / Bundled Payment“Accountable Care” and Risk Payments

Post‐Acute Care is a Critical Part 

of Quality Improvement and Patient‐Centered Care

Post‐Acute Care Can Help Reduce 

Costs in a Rapidly Changing 

Payment Environment

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Tremendous Opportunities Exist to Better Manage Patient Care for Patients Discharged From Acute Care Hospitals

35% of Medicare Beneficiaries are Discharged from Acute Hospitals to Post-Acute Care

Intensity of Service LowerHigherMedicare Patients’ Use of Post‐Acute Services Throughout an “Episode of Care” (2)

Currently there are 47.6 million Medicare beneficiaries with an estimated 9,100 individuals added to the program each day.(1)

Patients’ first site of discharge after acute care hospital stayPatients’ use of site 

during a 90 day episode

SHORT‐TERM ACUTE CARE HOSPITALS

LONG‐TERM  ACUTE CARE HOSPITALS

INPATIENT REHAB

SKILLED NURSING FACILITIES

OUTPATIENT REHAB

HOMEHEALTHCARE

37%2% 10%

11%

41%

52%

9%

21%2% 61%

(1) Source: U.S. Census Projections(2) Source: RTI, 2009: Examining Post Acute Care Relationships in an Integrated Hospital System

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Source: Kindred Internal Data ‐ September, 2012 YTD

Kindred Nursing andRehabilitation Centers

37% 6%

Skilled Nursing and 

Rehab Centers

18% with Home Health

Inpatient Rehab Facility

Kindred Transitional Care Hospitals

14%

Skilled Nursing and 

Rehab Centers

35% with Home Health

Kindred Hospital‐Based IRFs

53% Home

35% with Home Health

27% Home

76% Home

Patients Discharged From:

Kindred Is Positioned to Help Determine the Most Appropriate Care Setting For Patients asthey Continue Their Care Throughout a Post-Acute Episode

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“Continue The Care”

HOME

Pat

ient

Ser

vice

Inte

nsity

SKILLED NURSING FACILITIES

HOSPICEHOME HEALTH CARE

OUTPATIENT REHAB

ASSISTED LIVING

ACUTE CAREHOSPITALS

TRANSTRANSCARECARE

ICUICU

IN‐PATIENT REHAB

LTACHsFREESTANDING/ HIH

Patient Illness Severity

SAUSAU

TCC &

TCU

ADULT DAY CARE

Positioned to Take Advantage of Changing Healthcare LandscapeUniquely Positioned For Bundled Or Episodic Payment Environment

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Strategic Plan• Success in the Core

– Take care of our teammates and promote performance improvement– Continue to improve quality and clinical outcomes– Promote our value proposition and grow admissions and rehab contracts– Execute on cost reduction initiatives and process transformation ‐ Project Apollo

• Accelerate our Integrated Care Market (Cluster Development) Strategy– Develop service lines, clinical programs and integrated care management capabilities 

across the care continuum ‐ Continue the Care– Expand and integrate health system, physician and managed care relationships– Continue to invest in IT (electronic health record) linkages

• Aggressively expand Home Health and Hospice Services through acquisitions, JVs and de novo development

• Change business and asset mix and re‐deploy capital into faster growth, higher margin businesses through portfolio realignment and continued development in our Integrated Care Markets

• Participate and Invest in New Integrated Care and Payment Models/Businesses, including ACOs and Bundled Payment Demos with Government Sponsors (CMS), Health Systems, Physician Groups and Managed Care Payors

• Continue to explore avenues to create shareholder value and improve the capital structure of the company

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Kindred’s Strategy is Designed to Prepare for Significant Policy and Market Trends

Current Approximate Payor Mix

Potential Future Payor Mix

HospitalsHealth systemsOther PAC providers

The Next 10 Years…ACOs, bundle

holders

Fee for service (FFS)

Managed Care

Managed Care

FFS

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Gain Share with Partial 

and/or Shared Risk for Post‐Acute Episode

(e.g., case rates or bundled 

payment within sites of service and/or across a post‐acute episode for specific 

diagnoses)

Pay for Performance

with Bonus Payments and 

Penalties

Different Payment Models to Define a Path to Risk-Based Contracting Across a Post-Acute Episode of Care Over Time

Financial Alignment

High

Kind

red Risk

Low High

Medicare‐Based Rates

Level of Care PPD

Shared Risk for Post‐Acute Episode(e.g., 

bundling or case rates for full 

post‐acute episode)

Today Near‐Term Future

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Kindred’s Integrated Care Strategy is designed to prepare for a Delivery System that is more Clinically Integrated withShared Financial Incentives

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Full Continuumof Post‐Acute Care Services in Local Integrated Care 

Markets

Patient‐Centered Care Management Capabilities that Extend Across Post‐Acute Sites of Care to Improve Quality and 

Reduce Costs

Aligned Payment Incentives between 

Providers of Healthcare Services and Payors

• Expanding Home Health and Hospice capabilities• Enabling Physician coverage across sites of care

• Developing tools to ensure appropriate patient placement and case management

• Connecting sites of service through IT and clinical program linkages

Today: Fee‐for‐Service 

Near‐Term: Pay‐for‐Performance 

Goal: Shared Incentives, Post‐Acute Bundle or Episode of Care

Key Elements Steps to Advance Care and Payment Integration 

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2

3

CONTINUE THE CARE

MANAGING TRANSITIONS IN CARE

ADAPTING TO NEW PAYMENT SYSTEMS

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Accelerate Integrated Care Market and Network Development Strategy Through Multiple Pilots and Advancement of Key Enablers:

“Care Management” Managed Care Physician & Medical Staff Development

Network Development I‐T Interoperability

1 2 3

4 5

Develop and test capabilities through demonstration 

projects and pilots, including patient assessment and case management tools and clinical 

programs that are linked through an episode of care

Advance volume and rates strategies and test different payment models, including Bundled Payment Project 

with CMS

Implement medical leadership and physician 

alignment across acute and post‐acute sites of care

Implement strategies, including Joint Ventures, ACO participation with Payors, Physicians and 

Health Systems

Advance Electronic Health Record strategy (linking EMR between our sites of care and 

physicians, payors and hospitals)

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