Edgar Filing: KINDRED HEALTHCARE INC

Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 26, 2004

KINDRED HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction

of incorporation or organization)

001-14057

(Commission File

Number)

61-1323993

(IRS Employer

Identification No.)

680 South Fourth Street

Louisville, Kentucky

(Address of principal executive offices)

40202-2412

(Zip Code)

Registrant’s telephone number, including area code: (502) 596-7300

Not Applicable

(Former name or former address, if changed since last report)

Item 5.

Other Events and Regulation FD Disclosure.

Kindred Healthcare, Inc. (the “Company”) has announced earnings expectations for its continuing operations for fiscal 2004. Revenues for 2004 are expected to approximate between $3.5 billion to $3.6 billion. Operating income, defined as earnings before interest, income taxes, depreciation and rents, is expected to range from $484 million to $494 million. Depreciation and net interest costs for 2004 are expected to approximate $100 million. Net income from continuing operations is expected between $68 million and $75 million, or $1.58 to $1.74 per diluted share (based upon diluted shares of 43 million). For fiscal 2003, the Company reported revenues of $3.3 billion, operating income of $426 million and net income from continuing operations of $49.5 million or $1.41 per diluted share (based upon diluted shares of 35 million).

In addition to the risk factors set forth under “Forward Looking Statements,” the Company’s 2004 earnings guidance assumes no significant changes in government reimbursement as well as the successful completion of its previously announced development plans for additional hospitals and institutional pharmacy locations. Fiscal 2004 earnings estimates also assume continued progress in the Company’s transition of its long-term acute care hospitals to the new Medicare prospective payment system and continued stabilization of professional liability costs that are expected to range between $90 million and $100 million in 2004. The Company reported professional liability costs of $90 million in 2003.

The Company also announced that the Board of Directors has approved a 2-for-1 stock split in the form of a 100% stock dividend. The new shares will be distributed on May 27, 2004 to stockholders of record at the close of business on May 10, 2004. The earnings guidance set forth above gives effect to the stock split.

Forward Looking Statements

This Form 8-K 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 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.

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 on 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.

Factors that may affect the Company’s plans or results include, without limitation, (a) the Company’s ability to operate pursuant to the terms of its debt obligations and its master lease agreements with Ventas, Inc.; (b) the Company’s ability to meet its rental and debt service obligations; (c) adverse developments with respect to the Company’s results of operations or liquidity; (d) the Company’s ability to attract and retain key executives and other healthcare personnel; (e) increased operating costs due to shortages in qualified nurses and other healthcare personnel; (f) the effects of healthcare reform and government regulations, interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare industry; (g) changes in the reimbursement rates or methods of payment from third party payors, including the Medicare and Medicaid programs, and changes arising from the Medicare prospective payment system for long-term acute care hospitals and the recently enacted Medicare Prescription Drug, Improvement, and Modernization Act of 2003; (h) national and regional economic conditions, including their effect on the availability and cost of labor, materials and other services; (i) the Company’s ability to control costs, including labor and employee benefit costs; (j) the Company’s ability to comply with the terms of its Corporate Integrity Agreement; (k) the Company’s ability to integrate operations of acquired facilities; (l) the increase in the costs of defending and insuring against alleged professional liability claims and the Company’s ability to predict the estimated costs related to such claims; (m) the Company’s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability claims; and (n) the Company’s ability to successfully dispose of unprofitable facilities. 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.

Item 12.

Results of Operations and Financial Condition.

On April 26, 2004, the Company issued a press release announcing its financial results for the first quarter ended March 31, 2004. The press release, dated April 26, 2004, is attached as Annex A to this Form 8-K. On April 26, 2004, the Company also included the press release on its website at www.kindredhealthcare.com.

Annex A is incorporated herein by reference and has been furnished, not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.



Date: April 27, 2004	By:	/s/ Richard A. Lechleiter

		Richard A. Lechleiter
		Senior Vice President and Chief Financial Officer

Annex A

[Kindred Logo appears here]

Contact: Richard A. Lechleiter

Senior Vice President and

Chief Financial Officer

(502) 596-7734

KINDRED HEALTHCARE ANNOUNCES FIRST QUARTER RESULTS

Company Provides 2004 Earnings Guidance

Board of Directors Declares 2-for-1 Stock Split

LOUISVILLE, Ky. (April 26, 2004) – Kindred Healthcare, Inc. (the “Company”) (NASDAQ:KIND) today announced its operating results for the first quarter ended March 31, 2004. Share and per share data for all periods presented have been adjusted retroactively to reflect the 2-for-1 stock split discussed in this earnings release.

Continuing Operations

Revenues for the first quarter of 2004 rose 9% to $871 million compared to $802 million in the year-earlier period. Net income from continuing operations totaled $16.2 million or $0.38 per diluted share compared to $2.5 million or $0.07 per diluted share in the first quarter last year. Operating results for the first quarter of 2004 included pretax income of approximately $2.2 million ($1.3 million net of tax or $0.03 per diluted share) related to the favorable settlement of prior year hospital Medicare cost reports. Operating results for the first quarter of 2003 included pretax charges of approximately $8 million ($5 million net of tax or $0.15 per diluted share) related to changes in estimates of prior year professional liability costs.

Kindred President and Chief Executive Officer Paul J. Diaz commented, “We’re continuing to make progress on our goal to deliver more consistent and predictable operating results for our patients, employees and shareholders. In the first quarter, our quality and customer service measures continued to trend favorably. We also reported increased revenues and operating income in each of our four operating divisions compared to the first quarter last year. This success is a reflection of our continuing efforts to improve employee retention, quality and customer service in all of our operations.”

As previously announced, the Company began operating Peoplefirst Rehabilitation, a new division in 2004, by combining the Company’s external rehabilitation services operations with the rehabilitation services provided by therapists in Kindred nursing centers. Prior to 2004, the internal rehabilitation services operating results were included in the Company’s nursing center operations. Mr. Diaz commented, “In its first quarter of operations, Peoplefirst Rehabilitation reported revenues of $53 million and operating income of $8.5 million. This new organization is creating a great deal of excitement within the Company around our efforts to improve the quality of care we provide to our residents and external customers. We are confident that this momentum will lead to further external growth in the future.”

Discontinued Operations

Net losses from discontinued operations totaled $2.4 million or $0.06 per diluted share in the first quarter of 2004 compared to net losses of $15.6 million or $0.45 per diluted share in the first quarter of 2003.

Earnings Guidance for 2004

The Company announced earnings expectations for its continuing operations for fiscal 2004. Revenues for 2004 are expected to approximate between $3.5 billion to $3.6 billion. Operating income, defined as earnings before interest, income taxes, depreciation and rents, is expected to range from $484 million to $494 million. Depreciation and net interest costs for 2004 are expected to approximate $100 million. Net income from continuing operations is expected between $68 million and $75 million, or $1.58 to $1.74 per diluted share (based upon diluted shares of 43 million). For fiscal 2003, the Company reported revenues of $3.3 billion, operating income of $426 million and net income from continuing operations of $49.5 million or $1.41 per diluted share (based upon diluted shares of 35 million).

Mr. Diaz also noted, “The increased stabilization of our operations also has allowed us to return to providing earnings guidance. We believe that the remainder of 2004 offers opportunities to benefit from continued reimbursement visibility, operational improvement in our hospitals and stabilization of professional liability costs in our nursing centers. We also expect our pharmacy and rehabilitation businesses to build on their strong first quarter performance. While several challenges and much work lie ahead, we are optimistic about our 2004 performance.”

Stock Split

Related to the stock split, Mr. Diaz commented, “We believe that having more shares available from the split announced today will benefit our shareholders by increasing our trading activity and liquidity and reflects the confidence of management and the Board of Directors in our 2004 plan.”

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 Section 21E 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.

Kindred Healthcare, Inc. is a national healthcare services company operating hospitals, nursing centers, institutional pharmacies and a contract rehabilitation services business.

KINDRED HEALTHCARE, INC.

Financial Summary (a)

(Unaudited)

(In thousands, except per share amounts)


	Three months ended March 31,
	2004			2003
Revenues	$	871,262		$	802,158


Income from continuing operations	$	16,275		$	2,511
Loss from discontinued operations, net of income taxes		(2,435	)		(15,635	)

Net income (loss)	$	13,840		$	(13,124	)


Earnings (loss) per common share:
Basic:
Income from continuing operations	$	0.46		$	0.07
Loss from discontinued operations		(0.07	)		(0.45	)

Net income (loss)	$	0.39		$	(0.38	)


Diluted:
Income from continuing operations	$	0.38		$	0.07
Loss from discontinued operations		(0.06	)		(0.45	)

Net income (loss)	$	0.32		$	(0.38	)


Shares used in computing earnings (loss)
per common share:
Basic		35,414			34,755
Diluted		42,721			34,767

(a)	Share and per share data for all periods presented have been adjusted retroactively to reflect a 2-for-1 stock split to be distributed in May 2004.

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations (a)

(Unaudited)

(In thousands, except per share amounts)


	Three months ended March 31,
	2004			2003
Revenues	$	871,262		$	802,158

Salaries, wages and benefits		492,071			460,752
Supplies		116,733			104,182
Rent		64,459			63,078
Other operating expenses		145,406			146,839
Depreciation		22,046			19,195
Interest expense		3,656			2,888
Investment income		(1,218	)		(1,635	)

		843,153			795,299

Income from continuing operations before income taxes		28,109			6,859
Provision for income taxes		11,834			4,348

Income from continuing operations		16,275			2,511
Loss from discontinued operations, net of income taxes		(2,435	)		(15,635	)

Net income (loss)	$	13,840		$	(13,124	)

Earnings (loss) per common share:
Basic:
Income from continuing operations	$	0.46		$	0.07
Loss from discontinued operations		(0.07	)		(0.45	)

Net income (loss)	$	0.39		$	(0.38	)

Diluted:
Income from continuing operations	$	0.38		$	0.07
Loss from discontinued operations		(0.06	)		(0.45	)

Net income (loss)	$	0.32		$	(0.38	)

Shares used in computing earnings (loss) per common share:
Basic		35,414			34,755
Diluted		42,721			34,767

(a)	Share and per share data for all periods presented have been adjusted retroactively to reflect a 2-for-1 stock split to be distributed in May 2004.

KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)


	March 31, 2004			December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	17,827		$	66,524
Cash—restricted		7,864			7,339
Insurance subsidiary investments		175,710			146,325
Accounts receivable less allowance for loss		475,238			429,304
Inventories		31,135			29,984
Deferred tax assets		89,836			89,836
Assets held for sale		27,360			27,400
Other		54,455			46,375

		879,425			843,087
Property and equipment		688,959			671,850
Accumulated depreciation		(212,963	)		(193,310	)

		475,996			478,540
Goodwill		31,417			31,417
Insurance subsidiary investments		66,157			74,618
Deferred tax assets		91,991			92,093
Other		63,066			65,659

	$	1,608,052		$	1,585,414

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	119,057		$	119,087
Salaries, wages and other compensation		207,004			214,113
Due to third party payors		27,669			31,406
Professional liability risks		71,140			83,725
Other accrued liabilities		83,938			88,333
Income taxes		46,356			36,684
Long-term debt due within one year		4,729			4,532

		559,893			577,880
Long-term debt		154,708			139,397
Professional liability risks		220,714			212,013
Deferred credits and other liabilities		58,974			58,559
Stockholders’ equity (a):
Common stock, $0.25 par value; authorized 175,000 shares; issued 36,369 shares – March 31, 2004 and 36,340 shares – December 31, 2003		9,092			9,085
Capital in excess of par value		585,853			585,394
Deferred compensation		(6,296	)		(8,040	)
Accumulated other comprehensive income		496			348
Retained earnings		24,618			10,778

		613,763			597,565

	$	1,608,052		$	1,585,414

(a)	Retroactively adjusted to reflect a 2-for-1 stock split to be distributed in May 2004.

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)


	Three months ended March 31,
	2004			2003
Cash flows from operating activities:
Net income (loss)	$	13,840		$	(13,124	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		22,046			20,083
Amortization of deferred compensation costs		1,743			1,253
Provision for doubtful accounts		8,116			6,288
Other		(102	)		506
Change in operating assets and liabilities:
Accounts receivable		(54,304	)		(53,316	)
Inventories and other assets		(9,468	)		(6,387	)
Accounts payable		(3,184	)		(2,998	)
Income taxes		9,912			(5,457	)
Due to third party payors		(3,737	)		3,551
Other accrued liabilities		(9,062	)		27,935

Net cash used in operating activities		(24,200	)		(21,666	)

Cash flows from investing activities:
Purchase of property and equipment		(17,881	)		(10,565	)
Purchase of insurance subsidiary investments		(9,776	)		(30,395	)
Sale of insurance subsidiary investments		5,672			2,333
Net change in insurance subsidiary cash and cash equivalents		(16,820	)		(71,911	)
Net change in other investments		1,777			(4,685	)
Other		508			(333	)

Net cash used in investing activities		(36,520	)		(115,556	)

Cash flows from financing activities:
Net change in revolving credit borrowings		16,900			—
Repayment of long-term debt		(1,032	)		(112	)
Payment of deferred financing costs		—			(1,596	)
Issuance of common stock		467			—
Other		(4,312	)		(4,967	)

Net cash provided by (used in) financing activities		12,023			(6,675	)

Change in cash and cash equivalents		(48,697	)		(143,897	)
Cash and cash equivalents at beginning of period		66,524			244,070

Cash and cash equivalents at end of period	$	17,827		$	100,173

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations (a)

(Unaudited)

(In thousands, except per share amounts)


	2003 Quarters															First Quarter 2004
	First			Second			Third			Fourth			Year			First Quarter 2004
Revenues	$	802,158		$	813,848		$	837,035		$	830,978		$	3,284,019		$	871,262

Salaries, wages and benefits		460,752			462,320			469,112			473,263			1,865,447			492,071
Supplies		104,182			104,440			107,701			113,293			429,616			116,733
Rent		63,078			64,215			64,783			64,230			256,306			64,459
Other operating expenses		146,839			140,776			144,368			131,524			563,507			145,406
Depreciation		19,195			19,927			20,407			21,328			80,857			22,046
Interest expense		2,888			2,992			1,054			3,388			10,322			3,656
Investment income		(1,635	)		(1,676	)		(1,333	)		(1,491	)		(6,135	)		(1,218	)

		795,299			792,994			806,092			805,535			3,199,920			843,153

Income from continuing operations before reorganization items and income taxes		6,859			20,854			30,943			25,443			84,099			28,109
Reorganization items		—			—			—			1,010			1,010			—

Income from continuing operations before income taxes		6,859			20,854			30,943			26,453			85,109			28,109
Provision for income taxes		4,348			7,710			12,629			10,968			35,655			11,834

Income from continuing operations		2,511			13,144			18,314			15,485			49,454			16,275
Discontinued operations, net of income taxes:
Loss from operations		(15,635	)		(20,555	)		(5,780	)		(3,407	)		(45,377	)		(2,435	)
Loss on divestiture of operations		—			(36,019	)		(827	)		(42,567	)		(79,413	)		—

Net income (loss)	$	(13,124	)	$	(43,430	)	$	11,707		$	(30,489	)	$	(75,336	)	$	13,840

Earnings (loss) per common share:
Basic:
Income from continuing operations	$	0.07		$	0.38		$	0.53		$	0.44		$	1.42		$	0.46
Discontinued operations:
Loss from operations		(0.45	)		(0.59	)		(0.17	)		(0.10	)		(1.30	)		(0.07	)
Loss on divestiture of operations		—			(1.04	)		(0.02	)		(1.21	)		(2.28	)		—

Net income (loss)	$	(0.38	)	$	(1.25	)	$	0.34		$	(0.87	)	$	(2.16	)	$	0.39

Diluted:
Income from continuing operations	$	0.07		$	0.38		$	0.52		$	0.38		$	1.41		$	0.38
Discontinued operations:
Loss from operations		(0.45	)		(0.59	)		(0.17	)		(0.08	)		(1.29	)		(0.06	)
Loss on divestiture of operations		—			(1.04	)		(0.02	)		(1.05	)		(2.27	)		—

Net income (loss)	$	(0.38	)	$	(1.25	)	$	0.33		$	(0.75	)	$	(2.15	)	$	0.32

Shares used in computing earnings (loss) per common share:
Basic		34,755			34,813			34,885			35,062			34,880			35,414
Diluted		34,767			34,828			35,143			40,685			35,047			42,721

(a)	Share and per share data for all periods presented have been adjusted retroactively to reflect a 2-for-1 stock split to be distributed in May 2004.

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data

(Unaudited)

(In thousands)


	2003 Quarters															First Quarter 2004
	First			Second			Third			Fourth			Year			First Quarter 2004
Revenues:
Hospital division	$	331,862		$	338,360		$	341,368		$	325,619		$	1,337,209		$	348,648
Health services division (a)		410,832			416,768			431,978			433,532			1,693,110			444,994
Rehabilitation division (a)		8,502			8,795			12,065			14,121			43,483			52,699
Pharmacy division		66,126			64,850			67,075			74,382			272,433			79,746

		817,322			828,773			852,486			847,654			3,346,235			926,087
Eliminations:
Pharmacy		(15,164	)		(14,925	)		(15,451	)		(16,676	)		(62,216	)		(18,136	)
Rehabilitation (a)		—			—			—			—			—			(36,689	)

		(15,164	)		(14,925	)		(15,451	)		(16,676	)		(62,216	)		(54,825	)

	$	802,158		$	813,848		$	837,035		$	830,978		$	3,284,019		$	871,262

Income from continuing operations:
Operating income (loss):
Hospital division	$	70,538		$	75,455		$	87,171		$	73,702		$	306,866		$	80,066
Health services division (a)		43,424			57,235			54,944			64,436			220,039			49,469
Rehabilitation division (a)		(959	)		(750	)		261			(315	)		(1,763	)		8,519
Pharmacy division		6,702			6,133			6,150			7,508			26,493			7,609
Corporate:
Overhead		(26,713	)		(28,354	)		(28,670	)		(28,898	)		(112,635	)		(26,834	)
Insurance subsidiary		(2,607	)		(3,407	)		(4,002	)		(3,535	)		(13,551	)		(1,777	)

		(29,320	)		(31,761	)		(32,672	)		(32,433	)		(126,186	)		(28,611	)

		90,385			106,312			115,854			112,898			425,449			117,052
Reorganization items		—			—			—			1,010			1,010			—

Operating income		90,385			106,312			115,854			113,908			426,459			117,052
Rent		(63,078	)		(64,215	)		(64,783	)		(64,230	)		(256,306	)		(64,459	)
Depreciation		(19,195	)		(19,927	)		(20,407	)		(21,328	)		(80,857	)		(22,046	)
Interest, net		(1,253	)		(1,316	)		279			(1,897	)		(4,187	)		(2,438	)

Income from continuing operations before income taxes		6,859			20,854			30,943			26,453			85,109			28,109
Provision for income taxes		4,348			7,710			12,629			10,968			35,655			11,834

	$	2,511		$	13,144		$	18,314		$	15,485		$	49,454		$	16,275

(a)	Financial data presented for periods prior to January 1, 2004 have not been restated to reflect the new rehabilitation business alignment.

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

(In thousands)


	2003 Quarters										First Quarter 2004
	First		Second		Third		Fourth		Year		First Quarter 2004
Rent:
Hospital division	$	23,284	$	23,706	$	23,441	$	22,753	$	93,184	$	22,844
Health services division (a)		39,031		39,808		40,459		40,530		159,828		40,283
Rehabilitation division (a)		69		95		123		185		472		611
Pharmacy division		630		547		698		703		2,578		662
Corporate		64		59		62		59		244		59

	$	63,078	$	64,215	$	64,783	$	64,230	$	256,306	$	64,459

Depreciation:
Hospital division	$	7,054	$	7,450	$	7,684	$	8,257	$	30,445	$	8,464
Health services division (a)		6,373		6,569		6,688		6,740		26,370		6,893
Rehabilitation division (a)		16		20		22		25		83		33
Pharmacy division		517		539		561		560		2,177		530
Corporate		5,235		5,349		5,452		5,746		21,782		6,126

	$	19,195	$	19,927	$	20,407	$	21,328	$	80,857	$	22,046

Capital expenditures, excluding acquisitions (including discontinued operations):
Hospital division	$	2,822	$	4,133	$	5,773	$	13,388	$	26,116	$	5,406
Health services division (a)		3,222		6,375		9,768		9,804		29,169		8,450
Rehabilitation division (a)		51		47		35		11		144		47
Pharmacy division		616		522		815		2,254		4,207		773
Corporate:
Information systems		3,207		5,992		4,071		8,223		21,493		2,651
Other		647		408		361		1,551		2,967		554

	$	10,565	$	17,477	$	20,823	$	35,231	$	84,096	$	17,881

(a)	Financial data presented for periods prior to January 1, 2004 have not been restated to reflect the new rehabilitation business alignment.

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)


	2003 Quarters										First Quarter 2004
	First		Second		Third		Fourth		Year		First Quarter 2004
Hospital data:
End of period data:
Number of hospitals		63		63		64		66				68
Number of licensed beds		5,076		5,098		5,129		5,219				5,323
Revenue mix % (a):
Medicare		60		59		62		63		61		66
Medicaid		8		8		7		8		8		7
Private and other		32		33		31		29		31		27
Admissions:
Medicare		6,612		6,346		6,053		6,681		25,692		6,900
Medicaid		648		604		670		661		2,583		715
Private and other		1,281		1,322		1,333		1,359		5,295		1,460

		8,541		8,272		8,056		8,701		33,570		9,075

Patient days:
Medicare		216,266		214,116		193,069		191,904		815,355		207,052
Medicaid		31,764		32,470		31,362		29,488		125,084		27,754
Private and other		56,225		59,339		54,080		52,725		222,369		52,391

		304,255		305,925		278,511		274,117		1,162,808		287,197

Average length of stay:
Medicare		32.7		33.7		31.9		28.7		31.7		30.0
Medicaid		49.0		53.8		46.8		44.6		48.4		38.8
Private and other		43.9		44.9		40.6		38.8		42.0		35.9
Weighted average		35.6		37.0		34.6		31.5		34.6		31.6
Revenues per admission (a):
Medicare	$	30,050	$	31,594	$	35,157	$	30,987	$	31,878	$	33,321
Medicaid		40,547		44,766		36,974		37,825		39,910		33,228
Private and other		83,449		83,830		77,860		68,870		78,395		65,054
Weighted average		38,855		40,904		42,374		37,423		39,833		38,419
Revenues per patient day (a):
Medicare	$	919	$	936	$	1,102	$	1,079	$	1,004	$	1,110
Medicaid		827		833		790		848		824		856
Private and other		1,901		1,868		1,919		1,775		1,867		1,813
Weighted average		1,091		1,106		1,226		1,188		1,150		1,214
Medicare case mix index (discharged patients only)		N/A		N/A		N/A		1.20		N/A		1.26
Average daily census		3,381		3,362		3,027		2,980		3,186		3,156
Occupancy %		69.8		69.0		61.9		59.9		65.1		62.4

(a)	Includes income of $14 million in the third quarter of 2003 and $2 million in the first quarter of 2004 related to certain Medicare reimbursement issues.

N/A – not available.

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)


	2003 Quarters										First Quarter 2004
	First		Second		Third		Fourth		Year		First Quarter 2004
Nursing center data:
End of period data:
Number of nursing centers:
Owned or leased		248		248		248		248				247
Managed		7		7		7		7				7

		255		255		255		255				254

Number of licensed beds:
Owned or leased		32,293		32,124		32,118		32,124				32,009
Managed		803		803		803		803				803

		33,096		32,927		32,921		32,927				32,812

Revenue mix %:
Medicare		33		33		32		33		32		36
Medicaid		48		48		50		48		49		46
Private and other		19		19		18		19		19		18
Patient days (excludes managed facilities):
Medicare		398,646		399,150		394,957		397,254		1,590,007		433,162
Medicaid		1,699,726		1,707,907		1,757,580		1,737,615		6,902,828		1,675,706
Private and other		410,378		418,824		422,529		426,890		1,678,621		407,684

		2,508,750		2,525,881		2,575,066		2,561,759		10,171,456		2,516,552

Revenues per patient day:
Medicare	$	338	$	342	$	344	$	364	$	347	$	372
Medicaid		117		118		123		120		119		121
Private and other		188		189		188		190		189		197
Weighted average		164		165		168		169		167		177
Average daily census		27,875		27,757		27,990		27,845		27,867		27,654
Occupancy %		86.0		85.6		86.8		86.4		86.2		86.0
Rehabilitation data:
Revenue mix %:
Company-operated		N/A		N/A		N/A		N/A		N/A		70
Non-affiliated		N/A		N/A		N/A		N/A		N/A		30
Pharmacy data:
Number of customer licensed beds at end of period:
Company-operated		29,804		27,566		27,886		28,280				28,188
Non-affiliated		28,365		28,848		29,507		33,127				35,102

		58,169		56,414		57,393		61,407				63,290

N/A – not applicable.