2011 Kindred Healthcare Clinical Impact Symposium Company Update
Company UpdatePRESENTED BY:Paul J. Diaz, President & CEOBenjamin A. Breier, Executive Vice President & COO
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.
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.
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.
Leading National Post-Acute Provider With Focus On Developing Cluster Market Service Offerings
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
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.
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
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.
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
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
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
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
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
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
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)
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
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
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
Company UpdatePRESENTED BY:Paul J. Diaz, President & CEOBenjamin A. Breier, Executive Vice President & COO