Kindred Healthcare Signs Definitive Agreement to Acquire Cleveland, Ohio Physician Practice Specializing in Home Care

  Kindred Healthcare Signs Definitive Agreement to Acquire Cleveland, Ohio
  Physician Practice Specializing in Home Care

Business Wire

LOUISVILLE, Ky. -- August 28, 2013

Kindred Healthcare, Inc. (the “Company” or “Kindred”) (NYSE:KND) today
announced that it has signed a definitive agreement to acquire Western Reserve
Senior Care (“Western Reserve”). Western Reserve, based in Cleveland, Ohio, is
a physician led, primary care practice that delivers care in home-based
settings (assisted living facilities, independent living and home). Western
Reserve’s physicians, nurse practitioners and nurses provide primary care,
specialty care and urgent care services for seniors who cannot leave home in
the Company’s Cleveland Integrated Care Market.

Western Reserve is a strategic addition to Kindred’s new Care Management
Division as the Company develops programs and capabilities which include
physician coverage across settings to better manage episodes of care.

Financial terms of the transaction were not disclosed. The Company expects to
finance the transaction with proceeds from its revolving credit facility. The
transaction is subject to customary conditions to closing and is expected to
close in the third quarter of 2013.

Founder and principal Dr. William Mills will become Vice President, Medical
Affairs for the Company’s Care Management Division and Chief Medical Officer
for Kindred at Home, the Company’s home health and hospice division. He also
will provide medical leadership in Kindred’s Cleveland Integrated Care Market.
Dr. Mills will report to Jon Rousseau, President of Kindred’s Care Management
Division. Dr. Mills is a Cleveland native who trained at Case Western Reserve
and MetroHealth Medical Center. He is on the active medical staff of the
Cleveland Clinic and University Hospitals Health Systems.

Cleveland is one of Kindred’s Integrated Care Markets which features two
transitional care (“TC”) hospitals (certified as long-term acute care (“LTAC”)
hospitals), three nursing and rehabilitation centers, one co-located
hospital-based sub-acute unit, two assisted living facilities and two home
health locations.

“In a patient-centered care model, physicians that follow a patient across
care settings will play a central role in helping patients Continue the Care
through a post-acute episode,” said Paul J. Diaz, Kindred’s Chief Executive
Officer. “As we develop and test new models of care, Dr. Mills and his team
will help us grow and succeed under today’s delivery and payment system while
preparing for future models. This includes advancing Kindred’s efforts to
create “Medical Homes” through our Care Management Division, and to provide
critical support for our Centers for Medicare and Medicaid Services (“CMS”)
Bundled Payment for Care Improvement pilot in the Cleveland market. His
experience will strengthen our partnerships with Cleveland Clinic physicians
and nurse practitioners and other local hospitals to improve quality outcomes
and lower Medicare fee-for-service rates.”

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section21E of the
Securities Exchange Act of 1934, as amended. 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. Statements in this press release concerning the
Company’s business outlook or future economic performance, anticipated
profitability, revenues, expenses or other financial items, and product or
services line growth, together with other statements that are not historical
facts, are forward-looking statements that are estimates reflecting the best
judgment of the Company based upon currently available information.

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, results or stock price include, without limitation, (a) the
receipt of all required regulatory approvals and the satisfaction of closing
conditions to the transactions discussed above, (b) the impact of healthcare
reform, which will initiate significant changes 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 party payors, including reforms resulting from the
Patient Protection and Affordable Care Act and the Healthcare Education and
Reconciliation Act (collectively, the “ACA”) or future deficit reduction
measures adopted at the federal or state level. Healthcare reform is affecting
each of the Company’s businesses in some manner. Potential future efforts in
the U.S. Congress to repeal, amend, modify or retract funding for various
aspects of the ACA create additional uncertainty about the ultimate impact of
the ACA on the Company and the healthcare industry. Due to the substantial
regulatory changes that will need to be implemented by CMS and others, and the
numerous processes required to implement these reforms, the Company 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 the Company’s business,
financial position, results of operations and liquidity, (c) the impact of
final rules issued by CMS on August 1, 2012 which, among other things, will
reduce Medicare reimbursement to the Company’s TC hospitals in 2013 and beyond
by imposing a budget neutrality adjustment and modifying the short-stay
outlier rules, (d) the impact of final rules issued by CMS on July 29, 2011
which significantly reduced Medicare reimbursement to the Company’s nursing
centers and changed payments for the provision of group therapy services
effective October 1, 2011, (e) the impact of the Budget Control Act of 2011
(as amended by the American Taxpayer Relief Act of 2012 (the “Taxpayer Relief
Act”)) which will automatically reduce federal spending by approximately $1.2
trillion split evenly between domestic and defense spending. An automatic 2%
reduction on each claim submitted to Medicare began on April 1, 2013, (f) the
impact of the Taxpayer Relief Act which, among other things, reduces Medicare
payments by 50% for subsequent procedures when multiple therapy services are
provided on the same day. At this time, the Company believes that the rules
related to multiple therapy services will reduce the Company’s Medicare
revenues by $25 million to $30 million on an annual basis, (g) 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 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 reimbursement for the Company’s TC
hospitals, nursing centers, inpatient rehabilitation hospitals and home health
and hospice operations, and the expiration of the Medicare Part B therapy cap
exception process, (h) 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, (i)
the ability of the Company’s hospitals to adjust to potential LTAC
certification and medical necessity reviews, (j) the impact of the Company’s
significant level of indebtedness on the Company’s funding costs, operating
flexibility and ability to fund ongoing operations, development capital
expenditures or other strategic acquisitions with additional borrowings, (k)
the Company’s ability to successfully pursue its development activities,
including through acquisitions, and successfully integrate new operations,
including the realization of anticipated revenues, economies of scale, cost
savings and productivity gains associated with such operations, as and when
planned, including the potential impact of unanticipated issues, expenses and
liabilities associated with those activities, (l) the Company’s ability to pay
a dividend as, when and if declared by the Board of Directors, in compliance
with applicable laws and the Company’s debt and other contractual
arrangements, (m) the failure of the Company’s facilities 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) the Company’s ability to meet its rental and debt service
obligations, (p) the Company’s ability to operate pursuant to the terms of its
debt obligations, and comply with its covenants thereunder, and its ability to
operate pursuant to 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 the
Company’s businesses, or which could negatively impact the Company’s
investment portfolio, (r) the Company’s ability to control costs, particularly
labor and employee benefit costs, (s) the costs of defending and insuring
against alleged professional liability and other claims (including those
related to pending wage and hour class action lawsuits against the Company)
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, (t) the Company’s ability to
successfully reduce (by divestiture of operations or otherwise) its exposure
to professional liability and other claims, (u) the Company’s obligations
under various laws to self-report suspected violations of law by the Company
to various government agencies, including any associated obligation to refund
overpayments to government payors, fines and other sanctions, (v) national and
regional economic, financial, business and political conditions, including
their effect on the availability and cost of labor, credit, materials and
other services, (w) increased operating costs due to shortages in qualified
nurses, therapists and other healthcare personnel, (x) the Company’s ability
to attract and retain key executives and other healthcare personnel, (y) the
Company’s ability to successfully dispose of unprofitable facilities, (z)
events or circumstances which could result in the impairment of an asset or
other charges, such as the impact of the Medicare reimbursement regulations
that resulted in the Company recording significant impairment charges in 2012
and 2011, (aa) changes in generally accepted accounting principles or
practices, and changes in tax accounting or tax laws (or authoritative
interpretations relating to any of these matters), and (bb) 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., a top-125 private employer in the United States, is
a FORTUNE 500 healthcare services company based in Louisville, Kentucky with
annual revenues of approximately $6 billion and approximately 72,000 employees
in 46 states. At June 30, 2013, Kindred through its subsidiaries provided
healthcare services in 2,167 locations, including 116 transitional care
hospitals, six inpatient rehabilitation hospitals, 169 nursing centers, 24
sub-acute units, 105 Kindred at Home hospice, home health and non-medical home
care locations, 103 inpatient rehabilitation units (hospital-based) and a
contract rehabilitation services business, RehabCare, which served 1,644
non-affiliated facilities. Ranked as one of Fortune magazine’s Most Admired
Healthcare Companies for five years in a row, 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. You can also follow us on
Twitter and Facebook.

Contact:

Kindred Healthcare, Inc.
Richard A. Lechleiter, 502-596-7734
Executive Vice President and Chief Financial Officer
 
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