Kindred Healthcare Executes Favorable Agreements with Ventas, Inc.

  Kindred Healthcare Executes Favorable Agreements with Ventas, Inc.

Kindred to Renew Leases for 22 Transitional Care Hospitals and 26 Nursing and
                            Rehabilitation Centers

   New Agreements Will Facilitate the Early Disposition of60 Non-Strategic
                               Nursing Centers

   Agreements Expected to Be Slightly Accretive to 2014 Earnings and Beyond

Business Wire

LOUISVILLE, Ky. -- October 1, 2013

Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today
announced that it has entered into agreements to renew early its leases with
Ventas, Inc. (“Ventas”) (NYSE:VTR) for 22 transitional care (“TC”) hospitals
(certified as long-term acute care (“LTAC”) hospitals) and 26 nursing and
rehabilitation centers (collectively, the “Renewal Facilities”). The current
lease term for the Renewal Facilities was scheduled to expire in April 2015.

Kindred will renew the existing leases for three TC hospitals and 15 nursing
and rehabilitation centers for an additional five year term effective May 1,
2015. The annual rents for these facilities will increase by $4.0 million on
October 1, 2014, and are subject to various rent escalators contained within
the existing master leases. In addition, Kindred will renew the leases for 19
TC hospitals and 11 nursing and rehabilitation centers for a term of 10 years
and seven months effective October 1, 2014. The annual rents for these
facilities will increase by $11.0 million on October 1, 2014, and are subject
to annual increases based upon the change in the consumer price index (subject
to an annual 4% cap).

The current aggregate annual rent for the Renewal Facilities approximates $79
million. The 22 TC hospitals contain 1,753 licensed beds and generated
revenues and earnings before interest, income taxes, depreciation,
amortization and rent (including the allocation of approximately $17 million
of overhead costs) of approximately $572 million and $98 million,
respectively, for the year ended December 31, 2012. The 26nursing and
rehabilitation centers contain 3,134 licensed beds and generated revenues and
earnings beforeinterest, income taxes, depreciation, amortization and rent
(including the allocation of approximately $8million of overhead costs) of
approximately $271 million and $48 million, respectively, for the year ended
December 31, 2012. The terms of the new leases are substantially similar to
the terms of the existing master lease agreements between Kindred and Ventas.

Kindred will not renew the leases for 60 nursing centers which will expire,
pursuant to the revised lease agreements, on September 30, 2014, rather than
April 30, 2015. These 60 nursing centers contain 7,214 licensed beds and
generated revenues and earnings before interest, income taxes, depreciation,
amortization and rent (including the allocation of approximately $16 million
of overhead costs) of approximately $540 million and $58 million,
respectively, for the year ended December 31, 2012. The current aggregate
annual rent for these 60nursing centers is approximately $60 million.

The agreements between Kindred and Ventas also provide Ventas with more
flexibility to accelerate the transfer of the 60 nursing centers to new
operators. Kindred expects to exit these facilities on or before September 30,
2014. In connection with the transaction, Kindred will pay Ventas $20 million.

Management believes that entering into the new lease agreements, along with
the non-renewal of the 60nursing centers, will be slightly accretive to the
Company’s consolidated earnings per diluted share in 2014. This estimate is
based upon a number of assumptions, including, but not limited to the 60
nursing centers transferring to discontinued operations by December 31, 2014,
and no material changes in Medicare and Medicaid reimbursement. The Company
will record the $20 million payment as an expense in the third quarter of 2013
and likely will record an additional impairment charge related to leasehold
improvements in connection with the early termination of the 60 nursing
centers.

Paul J. Diaz, Chief Executive Officer of the Company, remarked, “We are
pleased to have negotiated a mutually beneficial transaction with Ventas that
accelerates our strategic repositioning plan in 2014 and paves the way for us
to grow and advance our Integrated Care Market development plans. This
transaction will be slightly accretive to Kindred’s earnings in 2014 and will
allow us to retain all of our TC hospitals that are up for renewal, along with
several high quality nursing and rehabilitation centers. These transactions
reflect another step in our maturing and improving relationship with Ventas
and allow both companies to focus on the future and the creation of value for
our patients and shareholders.”

Mr. Diaz continued, “Like our previous lease renewal transaction, Ventas will
be able to re-lease more quickly the 60 nursing centers that we have elected
not to renew. In addition, the new arrangement reduces the existing lease term
by seven months from the previous expiration date. We believe these steps will
effectively accelerate the transition of these facilities for the benefit of
Kindred, Ventas, the new tenants, our employees and our residents. We will be
actively engaged with Ventas as it pursues the transfer of these 60 nursing
centers and we remain committed to operating these facilities in a manner to
achieve the best outcome for all involved. We believe that these transactions
will also significantly improve our capital structure, by reducing our lease
obligations and related leverage, and provide a path to profitability for our
Nursing Center Division.”

The effectiveness of the renewals is contingent upon there being no event of
default under the master lease agreements upon the renewal effective date in
October 2014 and May 2015, as applicable. Additional information regarding the
master lease agreements is contained in the Company’s Form 10-K for the year
ended December 31, 2012, and copies of the master lease agreements filed with
the Securities and Exchange Commission.

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
potential for diversion of management time and use of the Company’s resources
in seeking to transfer the operations of 60 non-strategic nursing centers
currently leased from Ventas, (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 the Centers for Medicare and Medicaid Services
(“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 $25million 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, (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 whistleblower and 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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