2011 Kindred Healthcare Clinical Impact Symposium Company Update

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Paul Diaz, Kindred Healthcare's CEO and Ben Breier, Kindred's COO delivered a company update to the attendees of the 2011 Clinical Impact Symposium.

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2011 Kindred Healthcare Clinical Impact Symposium Company Update

  1. 1. Company UpdatePRESENTED BY:Paul J. Diaz, President & CEOBenjamin A. Breier, Executive Vice President & COO
  2. 2. Forward-Looking StatementsThis presentation 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 Kindred sexpected 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 containingthe 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 Kindred s expectations as a result of a variety of factors, including, withoutlimitation, 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 Kindred is unable to predict orcontrol, that may cause Kindred 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 factorsdiscussed below and detailed from time to time in Kindred s filings with the Securities and Exchange Commission (the SEC ).In addition to the factors set forth above, other factors that may affect Kindred s plans or results include, without limitation, (a) the impact of a final rule issued by CMS on July 29, 2011 providing for a 11.1% reduction in Medicare reimbursementto nursing centers as well as changes in payments for the provision of group rehabilitation therapy services, (b) other potential reimbursement changes resulting from the Budget Control Act of 2011, (c) Kindred s ability to integrate the operationsof the acquired hospitals and rehabilitation services operations and realize the anticipated revenues, economies of scale, cost synergies and productivity gains in connection with the RehabCare acquisition and any other acquisitions that may beundertaken during 2011, as and when planned, including the potential for unanticipated issues, expenses and liabilities associated with those acquisitions, (d) the potential for diversion of management time and resources in seeking to integrateRehabCare s operations, (e) the potential failure to retain key employees of RehabCare, (f) the impact of Kindred s significantly increased levels of indebtedness as a result of the RehabCare acquisition on Kindred s funding costs, operatingflexibility and ability to fund ongoing operations, development capital expenditures or other strategic acquisitions with additional borrowings, particularly in light of ongoing volatility in the credit and capital markets, (g) the impact of healthcarereform, which will initiate significant reforms 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 partypayors. Healthcare reform will impact each of Kindred s businesses in some manner. Due to the substantial regulatory changes that will need to be implemented by CMS and others, and the numerous processes required to implement thesereforms, Kindred 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 Kindred s business,financial position, results of operations and liquidity, (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 arisingfrom and related to the Medicare prospective payment system for long-term acute care ( LTAC ) hospitals, including potential changes in the Medicare payment rules, the Medicare Prescription Drug, Improvement, and Modernization Act of2003, and changes in Medicare and Medicaid reimbursements for nursing centers, 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) Kindred s ability to successfully pursue its development activities, including through acquisitions, and successfullyintegrate new operations, including the realization of anticipated revenues, economies of scale, cost savings and productivity gains associated with such operations, (k) the impact of the Medicare, Medicaid and SCHIP Extension Act of 2007 (theSCHIP Extension Act ), including the ability of Kindred s hospitals to adjust to potential LTAC certification, medical necessity reviews and the moratorium on future hospital development, (l) the impact of the expiration of several moratoriumsunder the SCHIP Extension Act which could impact the short stay rules, the budget neutrality adjustment as well as implement the policy known as the 25 Percent Rule, which would limit certain patient admissions, (m) failure of Kindred sfacilities 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) Kindred s ability to meet its rental and debt serviceobligations, (p) Kindred s ability to operate pursuant to the terms of its debt obligations and its master lease agreements with Ventas, Inc. (NYSE: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 Kindred s businesses, or which could negatively impact Kindred s investment portfolio, (r) national andregional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services, (s) Kindred 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) Kindred s ability to attract and retain key executives and other healthcare personnel, (v) the increase in the costs of defending andinsuring against alleged professional liability and other claims and the 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)Kindred s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (x) Kindred s ability to successfully dispose of unprofitable facilities, (y) events or circumstances which couldresult in the impairment of an asset or other charges, (z) changes in generally accepted accounting principles ( GAAP ) or practices, and changes in tax accounting or tax laws (or authoritative interpretations relating to any of these matters), and(aa) Kindred s ability to maintain an effective system of internal control over financial reporting. Many of these factors are beyond Kindred s control. Kindred cautions investors that any forward-looking statements made by Kindred are notguarantees of future performance. Kindred 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.The information being provided today is as of this date only and Kindred 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 ordevelopments. Additional information concerning Kindred, including our SEC filings and a copy of this presentation, is available on our website www.kindredhealthcare.com, under the heading Investor Information.Reconciliation of non-GAAP Financial MeasuresOur website also includes reconciliations of any non-GAAP financial measures we mention in our presentations to their corresponding GAAP measures. These reconciliations may be found at www.kindredhealthcare.com under the headingInvestor Information.
  3. 3. Kindred Healthcare s Mission is to promote healing, provide hope, preserve dignity and produce valuefor each patient, resident, family member, customer, employee and shareholder we serve.
  4. 4. Premier Provider of Rehabilitation Services and Post- Acute Care in the United States(1) $6 billion(2) 2,191(3) 53,200(3) 76,900(3) consolidated sites of service, patients and dedicated revenues 451 facilities residents employees, in 46 states per day making Kindred a top-150 private employer in(1) Ranking based on revenues. the U.S.(4)(2) Pro forma revenues for the twelve months ended September 30, 2011.(3) As of September 30, 2011.(4) Ranking provided by TMP, Inc.
  5. 5. Leading National Post-Acute Provider With Focus On Developing Cluster Market Service Offerings
  6. 6. Tremendous  OpportuniAes  Exist  to  BeCer  Manage  PaAent   Care  for  PaAents  Discharged  from  Acute  Care  Hospitals   Medicare  Pa#ents  Use  of  Post-­‐Acute  Services  Throughout  an   Episode  of  Care (1)  Higher   Intensity  of  Service   Lower   SHORT-­‐TERM   LONG-­‐TERM   SKILLED   HOME   INPATIENT   OUTPATIENT   ACUTE  CARE   ACUTE  CARE   NURSING   HEALTH   REHAB   REHAB   HOSPITALS   HOSPITALS   FACILITIES   CARE  Pa#ents first  site  of  discharge  a1er  acute   2%   10%   41%   9%   37%   care  hospital  stay   Pa#ents  use  of  site  during  a  90  day  episode   2%   11%   52%   21%   61%   35% of Medicare Beneficiaries are Discharged from Acute Hospitals to Post-Acute Care  (1)  Source:  RTI,  2009:  Examining  Post  Acute  Care  Rela#onships  in  an  Integrated  Hospital  System  
  7. 7. Kindred Is Positioned to Help Determine the Most Appropriate Setting for Patients as they Continue Their Care Throughout a Post-Acute Episode Pa#ents  Discharged  From  Kindred   Pa#ents  Discharged  from   Pa#ents  Discharged  from     LTAC  Hospitals   Kindred  IRFs   Kindred  Nursing  and   Rehabilita#on  Centers   25%   5%   77%   50%   35%   13%   Home   Home   Home   Skilled   Inpa#ent   Skilled   16%  with   45%  with   31%  with   Nursing   Rehab   Nursing   Home   Home   Home   and   Facility   and   Health   Health   Health   Rehab     Rehab   Centers   Centers    (1)  Source:  Kindred  Internal  Data,  2010  data.  
  8. 8. Positioned to Take Advantage of Changing Healthcare Landscape Uniquely Positioned For Bundled Or Episodic Payment Environment Continue The Care   ACUTE  CARE   HOSPITALS     TRANS   LTACs   ICU  Patient Service Intensity FREESTANDING/  HIH   CARE   IN-­‐PATIENT   REHAB   SAU     SKILLED     TCC &   OUTPATIENT   NURSING   TCU REHAB   FACILITIES       ASSISTED     HOME     LIVING   HOSPICE   HEALTH       ADULT  DAY   CARE   CARE   HOME Patient Illness Severity
  9. 9. Our Strategic Opportunity and Value Proposition:§  Be a leader in helping to coordinate and deliver the highest quality care at the lowest cost (particularly for those patients who are the highest users of healthcare services) by delivering the best care at the most appropriate setting.§  Provide superior clinical outcomes and quality care with an approach which is patient-centered, disciplined and transparent§  Lower cost by reducing lengths of stay in acute care hospitals and transition patients home at the highest possible level of function§  Reduce rehospitalization through our integrated and interdisciplinary care management teams and protocols.
  10. 10. Hospital Division Quality  Consistently the Best ! 2.5 3.5 2.23 80.01.5 3.06 3.0 1.38 1.90 70.0 1.32 2.0 2.63 62.911.3 2.5 60.0 1.64 53.97 52.83 1.52 1.13 1.5 50.0 1.06 1.29 2.01.1 41.42 40.0 36.42 0.94 1.5 1.00.9 30.0 1.0 20.00.7 0.5 0.5 10.00.5 0.0 0.0 0.0 Pressure Wounds Blood Stream Infection Urinary Tract Infections Restraints Per 1000 Patient Days Per 1000 Central Line Days Per 1000 Urinary Catheter Days Per 1000 Patient Days 2007 2008 2009 2010 2011 2011 Results are YTD through September
  11. 11. Hospital DivisionCustomer Service  Consistent Year over Year Improvement 4.61 4.60 4.57 4.51 4.51 4.51 4.48 4.50 4.46 4.38 4.38 4.40 4.37 4.34 2007 4.31 4.30 4.23 4.23 2008 4.19 2009 4.20 2010 2011 4.10 4.00 3.90 Call Light Response Coordination Pain Management Between Shifts2011 Results are YTD through June
  12. 12. Nursing Center DivisionKindred s Survey Quality Performance Ranks 1st Among LargeProviders and Outperforms National Benchmarks in Key Areas %  of  Facili#es  with   %  of  Facili#es  with   %  of  Facili#es  with   Average  Number  of   Substandard  Care   Serious  Deficiencies   Zero  Deficiencies   Survey  Deficiencies   25.5% 23.2% 19.1% Higher  is   BeCer   12.2% 12.3% 9.1% 3.1% 2.2% 6.00 5.1 6.2 1.8% National Not  for  Profit Kindred
  13. 13. Nursing & Rehabilitation Centers Fulfilling our Mission and Delivery on our Value PropositionKindred  is  caring  for  sicker  paAents…   And  in  turn  has  invested  in   ResulAng  in  fewer  rehospitalizaAons   addiAonal  resources  to  care  for   and  more  paAents  going  home   them…   sooner  with  improved  clinical  150% outcomes…   60% 30% 135% 53% 106% 15% 11%100% 40% 36% 0% 48% -­‐6% 50% 20% 30% -­‐15% 9% -­‐19% 0% 0% -­‐30% 2005 2010 2004 2010 2008 2010 Nursing  Hours  PPD %  I ncrease  i n  Patients  Discharged  Home %  I ncrease  i n  Patients  Receiving  Dialysis Rehab  Hours  PPPD %  I ncrease  i n  Patients  Receiving  I V  Therapy %  Decrease  i n  Average  Length  of  Stay Pharmacy  Costs  ($m) %  I ncrease  i n  Admissions  from  Hospitals %  Decrease  i n  Rehospitalizations  within %  I ncrease  i n  Medicare  Case  Mix  I ndex 30  Days  of  Admission *  Data  not  adjusted  for  severity  of  illness  
  14. 14. Kindred Nursing Center Division American  Healthcare  AssociaAon  Quality  Awards    1   22   208   GOLD   SILVER   BRONZE   AWARD   AWARD   AWARD   WINNERS   WINNERS   WINNERS   Out  of  224   Only 10 Gold Total  Kindred   Award Winners in the United States! Nursing  and   Rehabilita#on   Centers  
  15. 15. RehabCare Improving % of Patients Discharged to Home Orthopedic Conditions 61.1 Pain Syndrom e 42.7 Am putation 29.7Other Disabling Im pairm ents 34.5 Debility 50.0 Wound 38.2 Pulm onary/Cardiac 37.5 Arthritis 23.1 Stroke 26.5 Neurological Condition 21.6 Spinal Cord Injury 25.4 Brain Dysfunction 9.8 0 10 20 30 40 50 60 70 •  Discharge to Home up year over year
  16. 16. Intensive Rehabilitation Services Provided in SNFs Produces Significant Clinical and Economic Value Greater  RehabilitaAon  Therapy  Intensity   Greater  RehabilitaAon  Therapy  Intensity   Increases  the  Rate  of  Discharge  to  Home   Decreases  SNF  Length  of  Stay   54.8% Intensive  Therapy   36.8% 40.2% 39.2% 32.2% 36.2%Services  Significantly   26.5% Improves  PaAent  FuncAoning  from  SNF   Admissions  to   Stroke Pulmonary Wound Brain Neurological Orthopedic Other Discharge   Cardiac Dysfunction Source:  Modified   FIM  Scores  from  Kindred  Internal  Data  (2010)  
  17. 17. Coordinating Clinical Services & Programs Across ServiceLines to Improve Outcomes and Prevent Readmissions InpaAent   Skilled  Nursing  &   Long-­‐Term  Acute   Hospital  Based   RehabilitaAve   Home  Health  &   RehabilitaAon   RehabilitaAon   Care  Hospitals   Sub-­‐Acute  Units   Therapy     Hospice   FaciliAes   Centers   Services Services Services Specialty Programs Therapies Services Cardiac Care Intensive Short-Term Cardiac Care Cardio-Pulmonary Skilled Nursing Care Respiratory & Complex and Medically w/ Specialty Pulmonary Care Pulmonary Care Pulmonary Care Rehabilitation Complex Programs Complex Wound Clinically Complex Wound Care, CHF, Severe Stroke, Brain, Care Care Wound Care Methadone Dosing, Spinal Cord, and Other Wound Care Therapies for Med Management, IV antibiotic Reconditioning Neurological Complex Wounds Safety Assessments, Therapy Wound Care Impairment IV Therapy Intensive Short – Orthopedic and Orthopedic Rehab Physical, Short-Term Complex Cognitive, Neurological Occupational & Term & Orthopedic Neurological / Rehabilitation Physical Rehabilitation Rehabilitation Speech Therapy Rehabilitation Stroke Rehabilitation Long-term Chronic Dialysis Dialysis, Wound Care, Care Palliative & Pain IV Therapy Psychiatric Nursing Pain Management Pulmonary Therapy Palliative & Hospice Programs Care
  18. 18. CLUSTER MARKET STRATEGY IS DESIGNED TO IMPROVE CARE COORDINATION CONTINUE  THE  CARE  §  Diverse post-acute service lines and clinical programs to support a continuum of care within an ACO and/or a bundled payment environment§  Coordinate admission process to ensure appropriate patient placement§  Strengthen linkages with acute hospitals, managed care payors, and referring health systems –  physician continuity of care across settings PotenAal  benefits  include   –  IT linkages, including electronic health improved  care  coordinaAon,     record reduced  re-­‐hospitalizaAons,  lower   –  agreed upon admission criteria and clinical capabilities costs  and  admissions  growth  
  19. 19. Closing Thoughts§  Track record for operational success based on commitment to quality, service excellence and a demonstrated ability to adapt to change§  We are in a strong financial position and have the flexibility to continue to grow and weather the current reimbursement head-winds§  People, Quality, Cost Management and Admissions/Contract Growth will always be our Key Drivers of Value Creation§  Well positioned to succeed long term in a changing post-acute landscape
  20. 20. Company UpdatePRESENTED BY:Paul J. Diaz, President & CEOBenjamin A. Breier, Executive Vice President & COO

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