Kindred Healthcare Comments on Proposed Medicare Payment Changes for Long-Term Acute Care Hospitals

LOUISVILLE, Ky.--(Business Wire)--
Kindred Healthcare, Inc. (the "Company") (NYSE: KND) today announced that the
Centers for Medicare and Medicaid Services ("CMS") issued late on May 29, 2009
proposed regulatory changes regarding Medicare reimbursement for long-term acute
care ("LTAC") hospitals. First, CMS issued an interim final rule in which CMS is
revising the relative payment weights that would apply to all discharges
occurring between June 1, 2009 and September 30, 2009. The revised payment
weights are intended to correct errors that CMS believes were caused by CMS`s
failure to follow its own budget neutral methodology for calculating the payment
weights.

Secondly, CMS issued a supplemental proposed rule for the fiscal year beginning
on October 1, 2009 to revise the fiscal 2010 payment weights and high cost
outlier threshold to take into account the proposed re-weighting of the 2009
payment rates discussed above. CMS projects that the changes related to the
supplemental proposed rule will result in a 2.2% increase to the average
Medicare payments to LTAC hospitals for fiscal 2010, which is 0.6% lower than
originally proposed on May 1, 2009.

Based upon the Company`s historical Medicare patient volumes, the Company
expects that these proposed rules would reduce Medicare revenues to the
Company`s hospitals by approximately $17 million for the last seven months of
2009.

The proposed interim final rule and the supplemental proposed rule are both
subject to a 30-day public comment period and are scheduled to become effective
in July 2009. The Company is continuing to evaluate the impact of these proposed
rules on its hospital operations and expects to update its annual 2009 earnings
guidance in connection with the release of its second quarter financial results.

Paul J. Diaz, President and Chief Executive Officer of the Company, commented,
"As we have in the past, we will look for alternatives to mitigate some of the
impact of these reimbursement reductions. We also will express our
disappointment to CMS and other policymakers about retroactive cuts to payments
under a prospective payment system. Healthcare providers rely on rate
consistency to plan our operations and make strategic investments in health
information technology, staffing and other quality-related areas, and
retroactive reductions in reimbursement with no notice in the middle of a rate
year undercut these efforts."

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. 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 or results include, without limitation, (a) changes in the
reimbursement rates or the methods or timing of payment from third party payors,
including 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
reimbursements for the Company`s nursing centers; (b) the impact of the
Medicare, Medicaid and SCHIP Extension Act of 2007, including the ability of the
Company`s hospitals to adjust to potential LTAC certification, medical necessity
reviews and the three-year moratorium on future hospital development; (c) the
effects of healthcare reform and government regulations, interpretation of
regulations and changes in the nature and enforcement of regulations governing
the healthcare industry; (d) failure of the Company`s facilities to meet
applicable licensure and certification requirements; (e) the further
consolidation of managed care organizations and other third party payors; (f)
the Company`s ability to meet its rental and debt service obligations; (g) the
Company`s ability to operate pursuant to the terms of its debt obligations and
its master lease agreements with Ventas, Inc. (NYSE:VTR); (h) the condition of
the financial markets, including volatility and deterioration 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;
(i) national and regional economic, financial, business and political
conditions, including their effect on the availability and cost of labor,
credit, materials and other services; (j) the Company`s ability to control
costs, particularly labor and employee benefit costs; (k) increased operating
costs due to shortages in qualified nurses, therapists and other healthcare
personnel; (l) the Company`s ability to attract and retain key executives and
other healthcare personnel; (m) the increase in the costs of defending and
insuring against alleged professional liability 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; (n) the Company`s ability to successfully reduce (by divestiture of
operations or otherwise) its exposure to professional liability claims; (o) the
Company`s ability to successfully pursue its development activities and
successfully integrate new operations, including the realization of anticipated
revenues, economies of scale, cost savings and productivity gains associated
with such operations; (p) the Company`s ability to successfully dispose of
unprofitable facilities; (q) events or circumstances which could result in
impairment of an asset or other charges; (r) changes in generally accepted
accounting principles or practices; and (s) 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. is a healthcare services company, based in Louisville,
Kentucky, with annual revenues of over $4 billion and approximately 54,800
employees in 40 states. At March 31, 2009, Kindred through its subsidiaries
provided healthcare services in 661 locations, including 82 long-term acute care
hospitals, 228 skilled nursing centers and a contract rehabilitation services
business, Peoplefirst rehabilitation services, which served 351 non-affiliated
facilities. Ranked first in Fortune magazine`s Most Admired Companies "Health
Care: Medical Facilities" category, 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

Copyright Business Wire 2009