Kindred Healthcare responds to CMS' proposed Medicare rule

Kindred Healthcare, Inc. (the "Company") (NYSE:KND) today issued a response to the proposed rule issued late yesterday by the Centers for Medicare and Medicaid Services ("CMS") regarding Medicare payment rates for skilled nursing facilities for fiscal year 2012.

"Kindred shares CMS's goal that Medicare rates should support quality care for increasingly medically complex patients who also require intensive rehabilitation services in order to reduce lengths of stay, return patients home more quickly and reduce rehospitalizations," said Paul J. Diaz, President and Chief Executive Officer of the Company. "The proposed rule offers two alternatives for a potential parity adjustment, one of which recognizes that three months' worth of data may be insufficient to arrive at an accurate calculation of rates. Kindred strongly agrees with this approach and urges CMS to ensure that adequate data exists before arriving at definitive conclusions."

"Specifically, Kindred has experienced a 4.2% decline in Medicare average length of stay from 2008-2010 and a 2.4% decline in the first quarter of 2011 compared to the same period last year. This not only validates our value proposition of transitioning patients home sooner, but also is relevant to an assessment of the extent of a parity adjustment since Medicare saves money with fewer patient days," continued Mr. Diaz. "Accurate data is also necessary before developing a rational policy for group therapy. While it is appropriate for CMS to examine whether the use of group therapy is a factor in arriving at accurate rates, Kindred's data shows that only 11% of therapy hours are attributable to group therapy and by far individual therapy is the most common treatment modality at approximately 88%. Accordingly, we look forward to working with CMS and Congress to ensure that adequate and appropriate payment rates for the sector are based upon sufficient data analysis and enable us all to fulfill our collective goal of providing quality post-acute care for patients in the most cost-effective setting."

Mr. Diaz commented further: "We remain committed to our core strategy of becoming the premier provider of diversified post-acute services and we continue to be enthusiastic about strengthening and expanding our service offerings through our announced acquisition of RehabCare Group, Inc. ("RehabCare") (NYSE:RHB). As previously announced, we expect that transaction to close by June 30, 2011."