An update for employees and leaders that describes progress towards 2014 goals at the half-year mark. Discussion about Kindred's new Contact Center is included.

1. Kindred Healthcare Mid-Year Update
August 28, 2014

2. Kindred Healthcare Delivering on Quality, Value and Innovation in Patient Care

3. Kindred Healthcare is the Premier Provider of Rehabilitation Services and Post-Acute Care in the U.S.
3
OUR MISSION
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.
OUR MANAGEMENT PHILOSOPHY
Kindred’s management philosophy is to focus on our people, on quality and customer service and our business results will follow.
63,000
510,000
2,300
47
Kindred is
Dedicated employees taking care of over
Patients and residents in over
locations in
states

4. … and More Quickly…
(Reducing Average Length-of-Stay) 2
Sending More Patients Home… 1
Kindred Healthcare Delivering on Quality, Value and Innovation in Patient Care Delivery
Outperforming National Quality Benchmarks
510,000
Patients and Residents were cared for in settings across the continuum
Kindred Hospitals, Nursing Centers, and Home Health and Hospice continue to improve on quality indicators and beat industry benchmarks
… Reducing Rehospitalization 2
•56% of our Nursing Center patients go home after 32 days
•70% of our Hospital patients go home or to a Lower Level of Care after 27 days
Reduced the total average length of stay
•by 10.3% in our Hospitals
•by 11% in our Nursing Centers
Kindred Hospitals reduced rehospitalization rates by 14% Kindred Nursing Centers have reduced rehospitalization rates by 15%
(1) 2013 Results (2) Same store Comparison 2013 to 2009
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5. Kindred’s Value Proposition 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)
•Lower healthcare costs by reducing rehospitalizations and lengths-of-stay in acute care hospitals and throughout an episode of care
•Participate in the development of new care delivery and payment models
5

6. Kindred Healthcare’s Mid-Year Update –
Success and Opportunity
Continued Progress Improving Teammate Engagement, Quality Assurance, Clinical Outcomes and Patient Satisfaction Measures Across The Enterprise
Solid Second Quarter and First Half of the Year Financial Results
Continued Progress Advancing Integrated Care Market Strategy and Development of Care Management Capabilities
Completed Business Segment Repositioning, Refinancing and Successful Equity Offering
Industry’s best Caregivers, Operators and Management Team, Together With a Strong Balance Sheet and Industry Leading Infrastructure Positioned for Growth!
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7. Hospital Division
$2.5 billion Revenues(1)
$518 million Operating Income(2)
Transitional Care Hospitals (certified as LTAC hospitals)
•97 Transitional Care Hospitals(3)
•7,145 licensed beds(3) Inpatient Rehabilitation Hospitals (IRFs)
•5 IRFs(3)
•215 licensed beds(3)
(1)Revenues for the twelve months ended June 30, 2014 (divisional revenues before intercompany eliminations).
(2)Operating income for the twelve months ended June 30, 2014.
(3)As of June 30, 2014.
(4)Before certain disclosed items reconciled in the Appendix.
•Continued clinical success with low rates of rehospitalizations and reduced employee turnover with improved teammate engagement
•Strong results with same-store admissions increase of 3% and only 1% growth in core operating costs per patient day; operating income margin improvement to 21.7% from 21.3%(4)
7
$607
$632
$1,625
$1,654
$ 1,250
$ 1,350
$ 1,450
$ 1,550
$ 1,650
$ 440
$ 490
$ 540
$ 590
$ 640
Q2 '13
Q2 '14
Q2 '13
Q2 '14
Revenue
Q2 Revenue
Per Patient Day Revenues
$129.0
$137.5
$100.0
$110.0
$120.0
$130.0
$140.0
Q2 '13
Q2 '14
Operating Income(4)

8. •2,237 sites of service served through 23,058 therapists(3)
•Including 104 hospital-based acute rehabilitation units(3)
•Therapists continue to deliver outstanding clinical results and patient functional improvement across sites of service
•Sequential core operating income and margin improvements for second quarter in a row
•Added 57 net new skilled nursing rehabilitation sites during first half of 2014
•In October 2013, acquired TherEX which provides on-site, hospital-based rehabilitation services in 11 states
$1.3 billion Revenues (1) $121 million Operating Income (2)
(1)Revenues for the twelve months ended June 30, 2014 (divisional revenues before intercompany eliminations).
(2)Operating income for the twelve months ended June 30, 2014.
(3)As of June 30, 2014.
8
2,139
2,237
0
600
1,200
1,800
2,400
2011
Q2 2014
Total Sites of Service
80.4%
79.8%
0.0%
30.0%
60.0%
90.0%
2011
Q2 2014
Productivity

9. Nursing Center Division
47 Transitional Care Centers (Sub-Acute facilities
licensed as SNFs)(3)
13 Nursing and Rehabilitation Centers
(with Transitional Care Units)(3)
12 Hospital-Based Sub-Acute Units (3)
38 Skilled Nursing Centers (Traditional SNFs)(3)
•Reduced nurse turnover and improved retention rates for all teammates
•Improvement in survey results, quality measures and 5-Star Ratings across the division
•Admissions up 1% compared to prior year
•Declines in average length of stay (ALOS) continue to weigh on average daily census (ADC)
•Nursing center division core operating income increased 11%(4) primarily due to growth in revenues and good cost controls
$1.1 billion Revenues(1) $143 million Operating Income (2)
(1)Revenues for the twelve months ended June 30, 2014 (divisional revenues before intercompany eliminations).
(2)Operating income for the twelve months ended June 30, 2014.
(3)As of June 30, 2014.
(4)Before certain disclosed items reconciled in the Appendix.
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13.6%
11.9%
13.2%
13.8%
14.3%
10.0%
12.0%
14.0%
16.0%
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Nursing Center Operating Income Margin (4)

10. •Patient satisfaction for Home Health and Hospice remain high with Home Health outcome measures outperforming national benchmarks
•Care Management division delivered 66% revenue growth and doubled core operating income compared to prior year
•Operating 202 sites of service in 13 states
•Focus on integration efforts has improved margin from 7.5% in Q2 2013 to 9.0%(2) in Q2 2014
•Acquired Silver State Accountable Care Organization in June 2014
•Opportunities to expand Kindred Home Based Primary Care in deal pipeline
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•202 sites of service in 13 states
•69 in Kindred’s Integrated Care Markets
•5,000 caregivers serving 16,100 patients on a daily basis
Care Management Division/Kindred At Home $352 million Pro Forma Annualized Revenues(1)
Care Management Division and
(1)Annualized based upon revenues and operating income for the three months ended June 30, 2014
(2)Before certain disclosed items reconciled in the Appendix.
$7
$18
$61
$143
$225
$352
$0.0
$100.0
$200.0
$300.0
$400.0
2009
2010
2011
2012
2013
2014 (1)
Revenue
($0.7)
($0.1)
$3.1
$13.7
$10.0
$28.4
($10.0)
$0.0
$10.0
$20.0
$30.0
$40.0
2009
2010
2011
2012
2013
2014 (1)
Revenue
Operating Income

11. 1-866-Kindred Contact Center
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Opportunity
•As the aging population continues to grow, consumers facing healthcare decisions often face a gap in accessing information and resources. Navigating care options, whether at home or following a hospital stay, are complex and stressful for families and patients.
Objective
•To create a contact center that provides consumers with healthcare choices as they navigate post-acute care.
•To serve as a trusted clinical resource for information and support.
•To help guide consumers to Kindred services that exist within their local communities.
Contact Methods
•1.866.KINDRED
•Contact Us form on www.kindredanswers.com landing page

12. Status
Pilot launched on April 15.
•Target Area – Cleveland (150 mile radius)
•Staffed with RNs
•Supported with digital, radio, TV and print advertising
•Contact Center has relocated to Louisville
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1-866-Kindred Contact Center Cleveland Pilot

13. 16
4
2
1
1
1
2
1
2
Total Contacts by Topic
Information 787
Education 138
Referrals 114
Complaint 39
Billing 20
Other 7
Total 1105
13
Admissions LTACH 12 Nursing Center 9 Home Health 5 Subacute Unit 3 Outpatient Rehab 1 Total 30
Contact Center Progress to Date
18
79
287
456
0
50
100
150
200
250
300
350
400
450
500
April
May
June
July
Total Contacts

14. Starts September 4
•National Digital Advertising
•Contact Center highlighted on all of Kindred’s public facing website home pages
•National advertising through our Social Media channels
Next Steps:
National Television!
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1-866-Kindred Contact Center National Rollout

15. 15
1-866-Kindred Contact Center Television Commercials

16. Delivered Attractive Financial Performances
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(1)Before certain disclosed items as reconciled in the Appendix
(2)Reimbursement cuts totaled $70 million
(3)Reflects midpoint of Company’s August 6, 2014 earnings guidance
Core Operating Margin (1):
12.7%
13.9%
13.6%
14.0%
Share Price & Dividends
($ in millions)
Closing Share Price
Cumulative Dividends
12/30/2011
12/31/2012
12/31/2013
8/19/2014
Despite sequential years of significant reimbursement cuts and a whole-sale restructuring of the Company’s business and capital structure, the Company has delivered on its promise to its patients, customers, teammates and shareholders!
$4.2
$4.8
$4.8
$5.1
2011
2012
2013
2014
Revenue
($ in billions)
$529
$679
$658
$715
2011
2012
2013
2014
Core Operating Income
($ in millions)
(2)
$11.77
$10.82
$19.74
$21.28
$0.24
$0.60
(3)

17. Revenue Mix1
(1)
(1)Revenue before intercompany eliminations for 12 months ended 2010 and in line with full year guidance for 2014.
(2)Leases capitalized using 6x rent; Equity represents market cap and Funded Debt calculated as of 6/30/14 and 12/31/10 for 2010.
Yesterday – 2010
17
Repositioning and Recapitalization Complete Growth Phase Begins
Today – 2014
Capital Structure (2)
KND is successfully shifting its business to faster growing businesses, improving margins, profitability and operating cash flows
Equity
22.4%
Funded
Debt
11.3%
Capitalized
Leases
66.3%
Equity
31.0%
Funded
Debt
30.0%
Capitalized
Leases
39.0%
Nursing
Centers
46.9%
Hospitals
42.3%
Rehab
10.4%
Care Mgnt
0.4%
Nursing
Centers
21.4%
Hospital
47.8%
Rehab
23.7%
CMD
7.1%

18. 18
Track Record of Accretive M&A Growth
2012
2013
2014
2011
Date: Dec 2013/ Feb. 2014
Paid: $83.0mm
Date: Dec. 2013
Paid: $95.0mm
Date: Dec. 2012
Paid: $2.0mm
Date: Aug. 2012
Paid: $71.0mm
Date: Sept. 2011
Paid: $51.0mm
Date: April 2011
Paid: Undisclosed
Date: Sept. 2013
Paid: $14.0mm
Date: June 2011
Paid: $1.3bn
Date: Oct. 2011
Paid: Undisclosed
Homecare Advantage
Real Estate of 9 SNFs
(Previously Leased from HCP)
Synergy Home Health Care, Inc.
Date: Oct. 2013
Paid: Undisclosed
All Heart Home Health and Hospice &
Western Reserve
Date: Spring/Summer 2013
Paid: Undisclosed
Mercy Continuing Care Hospital &
Qstaff Home Health &
Caring Hearts Home Health
Date: Jun. 2013
Paid: Undisclosed
Arrowhead Home Health
Date: Jul. 2012
Paid: Undisclosed
Illinois Family
Kindred has a history of thoughtful, disciplined growth, and successfully integrating acquisitions and achieving synergies. Current acquisition opportunities build on this track record of success.

19. 19
Hospitals (LTACs and IRFs)
Rehab Services
Transitional Care Centers (Sub-Acute)
Home Care and Hospice
Assisted Living Communities
Care Management Services
Robust Pipeline of Growth Opportunities
Each Kindred business line has numerous opportunities for organic and transactional growth.

20. Steve Cunanan Chief People Officer
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21. Training & Development
•Kindred University
•Leadership development
Kindred People Services Mission
Integrated Recruiting
•Talent sourcing
•Talent acquisition
•Kindred employment brand
•Workforce planning
Talent Management
•High potential identification
•Retention
•Development
•Organization design and restructuring
•Performance improvement processes
Core People Services
•Cost effective and efficient HR Services
•Employee relations
•HR transactions
•Onboarding and orientation
•HR compliance/ risk/worker’s comp/ safety
•M&A integration and business disposition
•Labor relations
Teammate Engagement
•Service Excellence
•Culture
•Inclusion
•Communications
•Employee engagement surveys
Kindred’s People Services Mission is to provide integrated, cost effective and efficient HR services that leverage the strength of our people to drive Kindred’s business strategy,
Pillars of Success
People Services will foster a culture of quality and engagement to enable our people to promote hope, healing and recovery for patients, residents and families.
Total Rewards
•Compensation administration, design, communications and compliance
•Benefits strategy, administration, communications and compliance
•Leaves of absence and time off
•M&A due diligence and analysis
•HR analytics

22. Engaging People
2012 2013 2014
Kindred Healthcare 3.97 3.93 4.02
Hospital Division 3.92 3.90 3.96
Care Management Division 4.18 4.18 4.16
RehabCare Division 4.01 4.03 4.11
Support Center 4.20 3.99 4.09
Nursing Center Division N/A 3.81 3.95
Employee Engagement Index
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23. Engaging People
All Three Key Indicators Improved From Last Year
•Strengths
–Satisfaction with job
–Involvement and empowerment
–Immediate supervision
•Areas for Improvement
-Management – teammates want management to show more interest in their well-being, enhance communication, and be more trustworthy
-Career development – although teammates strongly feel they receive appropriate training, they want more opportunity for professional development and growth and better communication around the opportunities
Measure
2014
2013
2012
Benchmark
Target Range
Employee engagement
4.02
3.93
3.97
4.03
4.00-4.50
Overall agree score
69%
65%
65%
71%
75%-80%
Intent to stay
80%
76%
77%
82%
80%
Major Survey Findings
+
+
23

24. Value Creation Cycle
Leadership
Teammate Engagement
Quality and Patient Satisfaction
Business Performance
24

25. People Services Business Linkage
Across Kindred, Higher Engagement Results in Lower Turnover
Care Settings with High Engagement Outperform on Patient Satisfaction, Quality and Business Performance
18.4%
10.2%
0%
10%
20%
Bottom 20% Engagement
Top 20% Engagement
Cumulative Turnover Rate (June-Nov 2013)
74%
80%
40%
60%
80%
100%
Bottom 20% Engagement
Top 20% Engagement
Patient Satisfaction – Overall Rating (July-Dec 2013)
25

26. Focusing on Diversity and Inclusion
•Suzanne Riedman, Chief Diversity Officer
•Workforce is 76% women, 40% minorities
•Since 2008:
–8.3% increase in female teammates in leadership positions
–2.6% increase in minorities in leadership positions
•200 teammates participating in Kindred’s First Women and Minorities in Leadership Conference in September
•Diversity Councils
•99% compliant with over 400 affirmative action audits
•Recruiting progress
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27. People Services Update
•Merit increases reinstated for 2014
•Finding ways to improve benefit changes and add value
•Progressing on our shared services model
•Turnover down to 25.3% and Retention is up to 80.8%
•Creating a Culture of Service
•Move Across America Wellness Initiative
27

28. Kindred’s Continue The Care Strategy is at the Forefront of Healthcare Delivery System Reform
28
Helping to shape the evolution of the American Healthcare Delivery System
by improving patient outcomes, smoothing care transitions, lowering costs and returning patients home at the highest level of wellness

29. Kindred Is Helping to Shape the Future of American Healthcare
•As the U.S. population ages, demand for patient-centered healthcare is growing rapidly—and Kindred is pioneering an integrated approach to address this demand
•“Continue The Care” strategy delivers the services that patients need across the full continuum of care, from inpatient hospitalization to post- acute rehab services to home and hospice care
•Kindred’s growth strategy will bring enhanced scale and foster innovation to provide more communities with integrated, patient- centered care in the lowest-cost setting
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Kindred is at the forefront of healthcare reform: we are implementing a better model to improve outcomes, smooth care transitions and lower costs

30. Kindred Healthcare Mid-Year Update
August 28, 2014