Kindred Healthcare Announces Additional Integrated Care Market Development Plans and Home Health Acq

Kindred Healthcare Announces Additional Integrated Care Market Development Plans and Home Health Acquisitions

Transactions include the development of a new Transitional Care Center in Phoenix, Arizona and the expansion of the Company's Continuum of Post-Acute Services in Two Integrated Care Markets

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Kindred Healthcare, Inc. ("Kindred" or the "Company") (NYS: KND) today announced that it has signed definitive agreements to build a new Transitional Care Center in the Company's Phoenix, Arizona Integrated Care Market, and acquire home health and hospice businesses in two markets, including its Houston, Texas Integrated Care Market.

Phoenix, Arizona

Kindred intends to open a new 120-bed Transitional Care Center (licensed for skilled nursing care) in Phoenix, Arizona, on the campus of IASIS Healthcare's St. Luke's Medical Center. The Transitional Care Center will specialize in intensive short-term rehabilitation therapy, including cardiac and orthopedic rehabilitation. Pending certain regulatory approvals, the Company anticipates groundbreaking in the third quarter of 2013 and opening in the second quarter of 2014. In the Phoenix market, Kindred currently operates two Transitional Care Hospitals (licensed as long-term acute care ("LTAC") hospitals).

Houston, Texas

Kindred's subsidiary has signed a definitive agreement to acquire QStaff Home Healthcare and Advanced Care Hospice ("QStaff"). Terms of the transaction were not disclosed. QStaff is a high-quality provider of home health and hospice services that operates one location in the Houston, Texas market and provides services in five counties.

QStaff currently generates annualized revenues of approximately $2 million. The QStaff operations will allow Kindred to expand its services in the Company's Houston Integrated Care Market, where it currently operates 13 Transitional Care Hospitals, two Inpatient Rehabilitation Hospitals and, through its RehabCare division, one hospital-based Acute Rehabilitation Unit.

The transaction is subject to several regulatory approvals and other conditions to closing and is expected to close in the second quarter of 2013. The Company expects that the transaction will be slightly accretive to earnings in 2013.

Odessa and Big Spring, Texas

Kindred's subsidiary has signed a definitive agreement to acquire Caring Hearts Home Health ("Caring Hearts"), a provider of home health services that operates two locations in Big Spring, Texas and Odessa, Texas that serve the West Texas market. Caring Hearts currently generates annualized revenues of approximately $1.6 million. Kindred at Home, through its affiliate IntegraCare, currently provides Home Health or Hospice services in 46 cities in Texas, including the Company's Dallas Integrated Care Market.

Terms of the transaction were not disclosed. The transaction is subject to several regulatory approvals and other conditions to closing and is expected to close in the second quarter of 2013.

Transitional Care Center Groundbreakings in Two Integrated Care Markets

Indianapolis, Indiana

The Company will break ground Monday, May 6, 2013 on a new 100-bed Transitional Care Center in Indianapolis, Indiana on a site adjacent to St. Francis Health Indianapolis Campus. The Transitional Care Center will specialize in intensive short-term rehabilitation therapy, including cardiac and orthopedic rehabilitation. The Company anticipates opening in the third quarter of 2014. In the Indianapolis market, Kindred currently operates two Transitional Care Hospitals, seven Nursing and Rehabilitation Centers, one Home Health and Hospice location and, through its RehabCare division, one hospital based Acute Rehabilitation Unit.

Las Vegas, Nevada

The Company also will break ground Tuesday, May 14, 2013 on a new 160-bed Transitional Care Center in Las Vegas, Nevada on a site adjacent to Universal Health Services, Inc.'s Spring Valley Hospital Medical Center. The Transitional Care Center will specialize in intensive short-term rehabilitation therapy, including cardiac, pulmonary and orthopedic rehabilitation. The Company anticipates opening in the third quarter of 2014. In the Las Vegas market, Kindred currently operates three Transitional Care Hospitals, one co-located hospital based Transitional Care Center, and three Home Health, Hospice and non-medical home care locations.

Paul J. Diaz, Kindred's Chief Executive Officer, commented, "These projects reflect our commitment to growing the Company and allow us to continue the expansion of our continuum of post-acute services where we see demand for our services. We are excited about the opportunity to expand our growing home health and hospice business and better Continue the Care for our patients throughout a post-acute episode as part of our Integrated Care Market strategy."

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding the Company's expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management and statements containing the words such as "anticipate," "approximate," "believe," "plan," "estimate," "expect," "project," "could," "should," "will," "intend," "may" and other similar expressions, are forward-looking statements.

Such forward-looking statements are inherently uncertain, and stockholders and other potential investors must recognize that actual results may differ materially from the Company's expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause the Company's actual results or performance to differ materially from any future results or performance expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in the Company's filings with the Securities and Exchange Commission.

In addition to the factors set forth above, other factors that may affect the Company's plans, results or stock price include, without limitation, (a) the receipt of all required regulatory approvals and the satisfaction of closing conditions to the transactions discussed above, (b) the Company's ability to integrate the operations of the acquired facilities and realize the anticipated revenues, economies of scale, cost synergies and productivity gains, (c) the impact of healthcare reform, which will initiate significant changes to the United States healthcare system, including potential material changes to the delivery of healthcare services and the reimbursement paid for such services by the government or other third party payors, including reforms resulting from the Patient Protection and Affordable Care Act and the Healthcare Education and Reconciliation Act (collectively, the "ACA") or future deficit reduction measures adopted at the federal or state level. Healthcare reform is affecting each of the Company's businesses in some manner. Potential future efforts in the U.S. Congress to repeal, amend, modify or retract funding for various aspects of the ACA create additional uncertainty about the ultimate impact of the ACA on the Company and the healthcare industry. Due to the substantial regulatory changes that will need to be implemented by the Centers for Medicare and Medicaid Services ("CMS") and others, and the numerous processes required to implement these reforms, the Company cannot predict which healthcare initiatives will be implemented at the federal or state level, the timing of any such reforms, or the effect such reforms or any other future legislation or regulation will have on the Company's business, financial position, results of operations and liquidity, (d) the impact of final rules issued by CMS on August 1, 2012 which, among other things, will reduce Medicare reimbursement to the Company's transitional care ("TC") hospitals in 2013 and beyond by imposing a budget neutrality adjustment and modifying the short-stay outlier rules, (e) the impact of final rules issued by CMS on July 29, 2011 which significantly reduced Medicare reimbursement to the Company's nursing and rehabilitation centers and changed payments for the provision of group therapy services effective October 1, 2011, (f) the impact of the Budget Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012 (the "Taxpayer Relief Act")) which will automatically reduce federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. The automatic 2% reduction on each claim submitted to Medicare began on April 1, 2013, (g) the impact of the Taxpayer Relief Act which, among other things, reduces Medicare payments by 50% for subsequent procedures when multiple therapy services are provided on the same day. At this time, the Company believes that the new rules related to multiple therapy services will reduce the Company's Medicare revenues by $25 million to $30 million on an annual basis, (h) changes in the reimbursement rates or the methods or timing of payment from third party payors, including commercial payors and the Medicare and Medicaid programs, changes arising from and related to the Medicare prospective payment system for LTAC hospitals, including potential changes in the Medicare payment rules, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and changes in Medicare and Medicaid reimbursement for the Company's TC hospitals, nursing and rehabilitation centers, inpatient rehabilitation hospitals and home health and hospice operations, and the expiration of the Medicare Part B therapy cap exception process, (i) the effects of additional legislative changes and government regulations, interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare industry, (j) the ability of the Company's hospitals to adjust to potential LTAC certification and medical necessity reviews, (k) the impact of the Company's significantly increased levels of indebtedness as a result of the RehabCare Group, Inc. acquisition on the Company's funding costs, operating flexibility and ability to fund ongoing operations, development capital expenditures or other strategic acquisitions with additional borrowings, (l) the Company's ability to successfully pursue its development activities, including through acquisitions, and successfully integrate new operations, including the realization of anticipated revenues, economies of scale, cost savings and productivity gains associated with such operations, as and when planned, including the potential impact of unanticipated issues, expenses and liabilities associated with those activities, (m) the failure of the Company's facilities to meet applicable licensure and certification requirements, (n) the further consolidation and cost containment efforts of managed care organizations and other third party payors, (o) the Company's ability to meet its rental and debt service obligations, (p) the Company's ability to operate pursuant to the terms of its debt obligations, and comply with its covenants thereunder, and its ability to operate pursuant to its master lease agreements with Ventas, Inc. (NYS: VTR) , (q) the condition of the financial markets, including volatility and weakness in the equity, capital and credit markets, which could limit the availability and terms of debt and equity financing sources to fund the requirements of the Company's businesses, or which could negatively impact the Company's investment portfolio, (r) national and regional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services, (s) the Company's ability to control costs, particularly labor and employee benefit costs, (t) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel, (u) the Company's ability to attract and retain key executives and other healthcare personnel, (v) the increase in the costs of defending and insuring against alleged professional liability and other claims and the Company's ability to predict the estimated costs related to such claims, including the impact of differences in actuarial assumptions and estimates compared to eventual outcomes, (w) the Company's ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (x) the Company's ability to successfully dispose of unprofitable facilities, (y) events or circumstances which could result in the impairment of an asset or other charges, such as the impact of Medicare reimbursement regulations that resulted in the Company recording significant impairment charges in 2012 and 2011, (z) changes in generally accepted accounting principles or practices, and changes in tax accounting or tax laws (or authoritative interpretations relating to any of these matters), and (aa) the Company's ability to maintain an effective system of internal control over financial reporting. Many of these factors are beyond the Company's control. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

About Kindred Healthcare

Kindred Healthcare, Inc., a top-125 private employer in the United States, is a FORTUNE 500 healthcare services company based in Louisville, Kentucky with annual revenues of $6 billion and approximately 78,000 employees in 46 states. At December 31, 2012, Kindred through its subsidiaries provided healthcare services in 2,203 locations, including 116 transitional care hospitals, six inpatient rehabilitation hospitals, 223 nursing and rehabilitation centers, 27 sub-acute units, 101 Kindred at Home hospice, home health and non-medical home care locations, 105 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,625 non-affiliated facilities. Ranked as one of Fortune magazine's Most Admired Healthcare Companies for five years in a row, Kindred'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. For more information, go to www.kindredhealthcare.com.

Kindred Healthcare, Inc.
Richard A. Lechleiter, 502-596-7734
Executive Vice President and
Chief Financial Officer

KEYWORDS: United States North America Arizona Indiana Nevada Texas

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