Edgar Filing: GENTIVA HEALTH SERVICES INC

425

Jefferies 2014 Global Healthcare

Conference

June 2, 2014

Filed pursuant to Rule 425 under the Securities

Act of 1933, as amended

Filer: Kindred Healthcare, Inc.

(Commission File No. 001-14057)

Subject Company: Gentiva Health Services, Inc.

(Commission File No. 001-15669)

Forward-Looking Statements

This presentation 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. Statements in this presentation 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

Kindred’s filings with the Securities and Exchange Commission.

In addition to the factors set forth above, other factors that may affect Kindred’s plans, results or stock price include, without limitation, (a) 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 Kindred’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 Kindred 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, Kindred 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 Kindred’s business, financial position, results of operations and liquidity, (b) the impact of the final rules issued by CMS on August 1, 2012 which, among other things, will reduce Medicare

reimbursement to Kindred’s transitional care (“TC”) hospitals in 2013 and beyond by imposing a budget neutrality adjustment and modifying the short-stay outlier rules, (c) the impact of the final rules issued by CMS on July 29, 2011 which significantly reduced

Medicare reimbursement to Kindred’s nursing centers and changed payments for the provision of group therapy services effective October 1, 2011, (d) the impact of the Budget Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012 (the

“Taxpayer Relief Act”)) which instituted an automatic 2% reduction on each claim submitted to Medicare beginning April 1, 2013, (e) Kindred’s ability to adjust to the new patient criteria for long-term acute care (“LTAC”) hospitals under the Pathway for SGR Reform

Act of 2013, which will reduce the population of patients eligible for Kindred’s hospital services and change the basis upon which Kindred is paid, (f) the impact of the Taxpayer Relief Act which, among other things, reduces Medicare payments by an additional 25% for

subsequent procedures when multiple therapy services are provided on the same day. At this time, Kindred believes that the rules related to multiple therapy services will reduce its 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 Kindred’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 Kindred’s hospitals and nursing centers to adjust to medical necessity reviews, (j) 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 Kindred) and Kindred’s ability to predict the estimated costs and reserves related to such claims, including the impact of differences in actuarial assumptions and estimates compared to eventual

outcomes, (k) the impact of Kindred’s significant level of indebtedness on Kindred’s funding costs, operating flexibility and ability to fund ongoing operations, development capital expenditures or other strategic acquisitions with additional borrowings, (l) Kindred’s

ability to successfully redeploy its capital and proceeds of asset sales in pursuit of its business strategy and 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, (m) Kindred’s ability to pay a dividend as,

when and if declared by the Board of Directors, in compliance with applicable laws and Kindred’s debt and other contractual arrangements, (n) the failure of Kindred’s facilities to meet applicable licensure and certification requirements, (o) the further consolidation

and cost containment efforts of managed care organizations and other third party payors, (p) Kindred’s ability to meet its rental and debt service obligations, (q) Kindred’s ability to operate pursuant to the terms of its debt obligations, and comply with its covenants

thereunder, and Kindred’s ability to operate pursuant to its master lease agreements with Ventas, Inc. (NYSE:VTR), (r) 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 Kindred’s businesses, or which could negatively impact Kindred’s investment portfolio, (s) Kindred’s ability to control costs, particularly labor and employee benefit costs, (t) Kindred’s ability to

successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (u) Kindred’s obligations under various laws to self-report suspected violations of law by Kindred 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) Kindred’s ability to attract and retain key executives and other healthcare personnel, (y) Kindred’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 Kindred recording significant impairment charges in the last three fiscal years, (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) Kindred’s ability to maintain an effective system of internal control over financial

reporting.

This presentation also includes forward-looking statements regarding Kindred’s proposed business combination transaction with Gentiva Health Services, Inc. (“Gentiva”) (including financing of the proposed transaction and the benefits, results, effects and timing of a

transaction), all statements regarding Kindred’s (and Kindred and Gentiva’s combined) expected future financial position, results of operations, cash flows, dividends, 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,” “would,” “should,” “will,” “intend,” “may,” “potential,” “upside,” and other

similar expressions. Statements in this presentation concerning the business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth of Kindred (and the combined

businesses of Kindred and Gentiva), together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of Kindred based upon currently available information.

Risks and uncertainties related to the proposed transaction with Gentiva include, but are not limited to, uncertainty as to whether Kindred will further pursue, enter into or consummate the transaction on the terms set forth in the proposal or on other terms, potential

adverse reactions or changes to business relationships resulting from the announcement or completion of the transaction, uncertainties as to the timing of the transaction, adverse effects on Kindred’s stock price resulting from the announcement or consummation of

the transaction or any failure to complete the transaction, competitive responses to the announcement or consummation of the transaction, the risk that regulatory, licensure or other approvals and financing required for the consummation of the transaction are not

obtained or are obtained subject to terms and conditions that are not anticipated, costs and difficulties related to the integration of Gentiva’s businesses and operations with Kindred’s businesses and operations, the inability to obtain, or delays in obtaining, cost

savings and synergies from the transaction, unexpected costs, liabilities, charges or expenses resulting from the transaction, litigation relating to the transaction, the inability to retain key personnel, and any changes in general economic and/or industry specific

conditions.

Many of these factors are beyond Kindred’s control. Kindred cautions investors that any forward-looking statements made by Kindred are not guarantees of future performance. Kindred 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

Kindred has provided information in this presentation to compute certain non-GAAP measurements for specified periods before certain charges or on a core basis. A reconciliation of the non-GAAP measurements to the GAAP measurements is included in this

presentation and on our website at www.kindredhealthcare.com under the heading “investors.”

Additional Information

This presentation is provided for informational purposes only and does not constitute an offer to purchase or the solicitation of an offer to sell any securities. Subject to future developments, Kindred may file a registration statement and/or tender offer documents with

the SEC in connection with a possible business combination transaction with Gentiva. Kindred and Gentiva shareholders should read those filings, and any other filings made by Kindred with the SEC in connection with a possible business combination, if any, as they will

contain important information. Those documents, if and when filed, as well as Kindred’s other public filings with the SEC, may be obtained without charge at the SEC’s website at www.sec.gov and at Kindred’s website at www.kindredhealthcare.com .

Kindred Healthcare’s Diversified Business and

Revenue Mix

(1) Revenues for the twelve months ended March 31, 2014 (before intercompany eliminations).

(2) March 31, 2014.

(3) For the twelve months ended March 31, 2014.

40%

($2.0 billion)

Medicare

Medicaid

Revenue

Mix

)

Business

Mix

(1)

21%

($1.1 billion)

Business-to-

Business

Commercial

Insurance/

Private

12%

($0.6 billion)

27%

($1.4 billion)

25%

($1.3 billion)

21%

($1.1 billion)

49%

($2.5 billion)

Hospitals

(LTAC/IRF)

RehabCare

Nursing and

Rehabilitation

Centers

($0.2 billion)

Care

Management

•

$5.1 billion total revenues

•

2,313 locations, 309 facilities in 47 states

•

503,000 patients and residents

•

63,000 dedicated employees

(1)

(2)

(3)

(2)

Leading Diversified Post-Acute Provider

With Focus on Developing Integrated Care Market

Capabilities

Transitional Care Hospitals (100)

Inpatient Rehabilitation Hospitals (5)

Hospital-Based Acute Rehab Units (105)

Nursing and Rehabilitation Centers (99)

RehabCare Total Sites of Service (1,825)

Home Health, Hospice and Private Duty

in 16 Integrated Care Markets (157)

Regional Support Centers

As of March 31, 2014

Integrated Care Market (12)

Targeted Integrated Care Market (10)

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

healthcare

services)

–

By providing superior clinical outcomes in the most appropriate setting, with

an approach which is patient-centered, disciplined and transparent

•

Lower healthcare costs by reducing rehospitalizations and lengths-of-stay

in acute care hospitals and throughout an episode of care

–

By transitioning patients home at the highest possible level of function

and wellness

•

Participate in the development of new care delivery and payment models

–

To better coordinate care and manage patients with chronic conditions,

including the dual-eligibles, with our partners through our integrated care

management teams and protocols

…

and More Quickly…

(Reducing Average

Length-of-Stay)

Sending More Patients

Home…

Kindred Healthcare

Delivering on Quality, Value and Innovation in Patient Care Delivery

Outperforming

National Quality Benchmarks

503,000

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

•

56%

of our Nursing Center

patients go home

after

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

•

10.3%

in our Hospitals

•

11%

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

Kindred’s Five-Year Strategic Plan

Creating Value for Patients, Payors, Teammates and Shareholders

Fee-For-Service World

Succeed Today

in a

Value-Based Payment World

Prepare for a Future

Succeed In

The Core

Reposition

Portfolio

Aggressively Grow

Kindred at Home,

RehabCare, and

Assisted Living

Businesses

Develop Care

Management

Capabilities

Advance

Integrated Care

Market Strategy

Improve Capital

Structure and Enhance

Shareholder Returns

–

In Integrated

Care Markets

–

Redeploy

Capital to

Higher

Margin

Businesses

–

To Operationalize

Continue

The

Care

–

Support new Risk-

Based Payment

Systems

–

People Services

–

Quality and

Clinical

Outcomes

–

Organic Growth

–

Manage Cost

and Capital

–

Partner with

Hospitals, Payors

and ACOs

–

Continue to Delever

–

Acquire Facility Real

–

Grow Dividend

Estate

2010 Actual

2014 Est.

Growth Phase Begins

Repositioning

Strategy Complete

Executing on Kindred’s 5-Year Strategic Plan

Business

Mix

Owned vs

Leased

Facilities

Capital

Structure

(1)

(2)

(1)

Revenue before intercompany eliminations;

(2)

Leases capitalized using 6x rent; Equity represents market cap and Funded Debt calculated as of 12/31

for 2010 Actual and 2014 Est. and calculated as of 3/31 for the twelve months ended March 31, 2014.

Pursuing Highly Accretive External Opportunities to Accelerate Growth

and Advance Our “Continue the Care”

Strategy

Aggressively Grow Kindred

at Home and RehabCare

Executing on Kindred’s 5-Year Strategic Plan

•

Kindred has invested approximately $121 million in

Acquisitions for its Kindred at Home and RehabCare

Divisions over the Last Twelve Months, Advancing Care

Management Capabilities

•

Integration of Senior Home Care acquisition ahead

of plan

Volumes, revenue and operating margins are all

exceeding our pro forma plan in its first full quarter

of operations

•

Kindred Home Based Primary Care (formerly Western

Reserve Senior Care) has exceeded expectations

Strengthens our commitment to further expand our

Care Management division

•

Senior Home Care

(December 2013)

Operates 47 home health locations

throughout Florida and Louisiana

$143 million in revenues

•

Western Reserve Senior Care

(October 2013)

Kindred’s entry into the home-based

primary care physician practice sector

•

TherEX (September 2013)

Provides on-site, hospital-based

rehabilitation services nationwide

•

Other Acquisitions include Virginia

Beach Home Health, Dignity Home

Health Joint Venture, and 3 TCCs

and 2 IRFs being developed on

hospital campuses in Integrated

Care Markets

Kindred has a history of thoughtful, disciplined growth, and successfully integrating acquisitions and

achieving synergies. Gentiva is a compelling opportunity to build on this track record of success

Kindred ‘s New Care Management Division

Optimized for Episodic Care, Bundled Payment and Risk

Develop Care

Management Capabilities

Executing on Kindred’s 5-Year Strategic Plan

Boston

Cleveland

Indianapolis

Las Vegas

Houston

“New”

Dallas/Fort

Worth

Single Market

Leadership

Incentive Alignment

Post-Acute Physician

Leadership

Standardized Quality

Measures

Centralized

Placement and

Admissions

Dedicated Care

Managers

I-T Interoperability /

Info Sharing

Integrated Care Market Strategy

Market Implementation Update

Advance Integrated Care

Market Strategy and

Implement Care

Management

Capabilities

Executing on Kindred’s 5-Year Strategic Plan

Attractive Investment Considerations

Kindred Substantially Repositioned for Growth Going Into 2015

•

Repositioned to faster growth, higher

margin and less capital intensive businesses

•

Through repositioning, $1 billion of

revenues shifted from Nursing Centers

Hospital, Rehab and Home Health Care

since 2011.

As of 3/31/14

Pro Forma 2014 rents of $335M at 6x

Improving Business

Mix

(Revenues)

Enhanced Future

Earnings, Margin and

Free Cash Flow

Profile

(as of May 7, 2014)

($ in millions)

•

$125 -

$145 million of free cash flows

•

Dividend Yield: 2.0%

Improved Capital

Structure

($ in millions)

•

Enterprise EBITDAR Multiple: 6.8x

•

Free Cash Flow Yield

: 10.5 %

•

TAD / EBITDAR: 5.1x

3) Market value calculated as of close of business on 3/31/14 ($23.42).

4) Free Cash Flow Yield represents free cash flow mid-point divided by Market Value of Equity.

2010

2014E

Hospital Services

42%

48%

Rehab Services

10%

24%

Nursing Center

47%

21%

Care Management /

Home Health Care

Total

100%

EBITDAR

Cash Flows from

Operations

CAPEX

Free Cash Flow

Outstanding Share Count

Dividend

$120 -

$130

$715-

$732

$26

$125 -

$145

$245 -

$275

55 million

Funded debt

$1,669

Lease obligations

$2,010

Total adjusted debt (TAD)

$3,679

Market value of equity

$1,283

Enterprise Value

$4,962

Legislative and Financial Review

LTAC Legislation Enacted

Providing Long Term Strategic Opportunity and Visibility

•

Key Provisions, Timeline and

Preliminary View of Impact

•

Strategic Considerations and

Opportunities

34%

Medicare Fee-For-Service

Medicaid

Insurance/Medicare

Advantage/Other

60%

The Bipartisan Budget Act of 2013, signed by the President

on December 26, brings long-sought patient and facility

criteria to long-term care hospitals

Hospital

Division

Revenue

Mix

(1)

Revenues for the twelve months ended March 31, 2014 (divisional revenues before intercompany eliminations).

Overview of Key Payment Provisions

in LTAC Criteria Legislation

•

Definition of Patients Eligible for LTAC Rate

–

Patients will continue to be eligible for payment under the current LTAC PPS if they meet either one of

two criteria: patients with 3 or more days in an acute care hospital Intensive Care Unit (ICU); or patients

receiving

“prolonged

mechanical

ventilation”

(greater

than

hours)

the

LTAC

•

Definition of Patients Eligible for “Site Neutral”

Rate

–

Other

medically

complex

patients

may

still

admitted

LTACs

and

receive

“site

neutral”

rate

that

either

LTAC

cost

per

diem

rate

“comparable”

payments

made

acute

care

hospitals

under

the IPPS payment system

•

Effective Date and Phase-In

–

Effective date: Two-year Phase-in of criteria begins after October 1, 2015, linked to each LTAC’s cost-

reporting period

–

About 70% of Kindred LTACs have cost-reporting periods that begin July of each year; phase-in of new

criteria would not begin for most Kindred LTACs until Summer 2016

–

During

phase-in,

cases

receiving

“site

neutral”

rate

get

paid

50%

based

current

LTAC

rate

and

50%

based

the

“site

neutral”

rate

The new criteria would not become fully effective until Summer 2018

for most Kindred LTACS.

2014

2015

2016

2017

2018

Oct. 1

July 1

Oct. 1

July 1

Oct. 1

July 1

Oct. 1

July 1

Oct. 1

July 1

1. Patient Criteria

2. Site Neutral IPPS

Equivalent Rate:

•

50/50 Blend

•

Full Site Neutral

Rate

3. 25-Day Length of Stay

Rule Relief

4. 25% Rule Relief

5. Moratorium

6. “50%”

Compliance

Test

2020

LTAC Legislation Phase-in and Timeline for the

Majority of Kindred’s Hospitals

Jan 1, 2014

Jan 1, 2015

Summer 2016

Summer

2018

Preliminary View of Impact on Kindred’s Medicare Fee

For

Service

Business

(60%

Current

Hospital

Revenues)

Payment Categories under

Current LTAC PPS

Payment Categories under

New LTAC Criteria

LTAC DRG (with outlier

payment)

~ 70% of current cases

LTAC Cost (for short

stays)

IPPS

Per

Diem

(for

very

short stays)

LTAC DRG (with outlier

payment) for defined cases

~ 40% of current cases

LTAC Cost; or

IPPS Per Diem

~ 60% of

current cases

~ 30% of

current

cases

“Site

Neutral”

Rate

When

fully

phased-in

(Summer

2018),

additional

30%

cases

will

paid

the

“site

neutral”

rate

under

the

new

criteria,

but

without

the

current

restraints

imposed

the

25-day length of stay requirement.

Comparison of IPPS and LTAC Per Diem Rates

for Top Diagnostic Categories

IPPS Per Diem

LTAC Per Diem

Percent of Kindred Discharges

Pulmonary Edema

$1,812

$1,722

12.8%

Septicemia

$2,106

$1,569

9.5%

Respiratory Infections

$1,806

$1,610

3.9%

Skin Ulcers

$1,607

$1,338

2.5%

Ventilator < 96 hours

$2,653

$2,061

2.3%

Osteomyletitis

$1,743

$1,411

2.1%

Chronic Obstructive Pulmonary

Disease

$1,617

$1,536

1.8%

Subject

effective

care

management,

IPPS

per

diem

rates

are

above

LTAC per diem rates for Kindred’s most frequent cases and creates a

platform for innovative arrangements with managed care payors for a

broader range of patients.

Incremental Volume from:

•

Increased Medicare Advantage volume, where the 25 ALOS

requirement will no longer be an issue (patient revenues priced to

match cost)

•

Potential for increased Direct Admissions to Kindred Hospitals

Incremental Volume from:

•

Opportunity to go upstream and take market share

•

Identify patients discharged from acute to SNF that are LTAC Eligible

The

New

LTAC

Criteria

Presents

Potential

Incremental

Medicare

Volume

for

Kindred

Hospitals

New

Patients

through

Repositioning of

Hospital Services

New Patients through

Site Neutral Payment

New Patients that

Meet LTAC Criteria

–

IRFs

–

Psych

–

Sub Acute

–

Managed Care Hospitals

Incremental Volume through:

•

Creation of new service lines

or whole hospital conversions

Strategic Considerations

•

Affirms role of LTACs in healthcare continuum for severely ill, medically

complex patients at LTAC rate and many other medically complex patients

at site neutral rate.

•

Creates strategic platform for “managed care”

and “episodic”

LTAC services

–

Elimination of 25-day length of stay requirement for MA patients

–

Direct admits to LTACs at site neutral IPPS comparable rates

–

Continued development of co-located Sub-Acute Units to create patient

care continuum for recovering critically chronically ill patients in need of

inpatient and rehabilitation services

•

Opportunity to develop clinical programs and services that better align cost

and care (including risk-based arrangements) over the implementation

period to appeal to ACOs, managed care organizations and others

LTAC legislation provides significant clarity and will allow Kindred to

organically grow patient volumes and leverage existing capacity.

Kindred and Gentiva

A Compelling Opportunity for

American Healthcare and Shareholders

Proposed Transaction Highlights

Per FactSet consensus estimates.

•

Kindred has submitted a proposal to the Gentiva Board of Directors to acquire all of the outstanding shares of Gentiva

common stock

•

Transaction is supported by a strong strategic and financial rationale and creates significant value for all shareholders

•

Kindred

has

strong

desire

reach

negotiated

agreement

with

Gentiva

•

We urge Gentiva’s shareholders to impress upon Gentiva's Board of Directors and Management the value of engaging

with Kindred immediately on a potential combination

Our Proposal

Purchase

Consideration

•

$14.00 per share

•

50% stock / 50% cash or 100% cash at Gentiva Board’s option

Premium &

Valuation

•

64% premium to May 14, 2014 closing price

•

59% premium to the 60-day volume weighted average price

•

40% premium to the median Wall Street analysts one year price target of $10 per share

•

8.9x 2014E EBITDA

Financing

•

Mix of debt, equity and other instruments such that pro forma leverage profile is consistent with Kindred

stand alone

Pro Forma

Impact

•

Significantly and immediately accretive to Kindred’s earnings and cash flows

•

Pro forma leverage remains similar to Kindred’s current standalone leverage

•

Approximately $60-80 million in annual pre-tax operating and financial synergies

•

Increased financial flexibility and meaningful capital structure

synergies by replacing Gentiva’s highly levered

capital structure

Combination Creates Premier Post-Acute Care Provider

($ in millions)

Kindred

Gentiva

Pro Forma

States

Locations

2,313

500

2,813

Employees

63,000

47,000

110,000

2014 Revenue

$5,200

$2,000

$7,200

2014 EBITDAR

$724

$226

$1,005

Based on midpoint of Kindred’s management’s guidance, issued on May 7, 2014.

Gentiva revenue based on management guidance. Gentiva EBITDAR based on consensus estimate.

Pro forma Kindred includes $55mm of non-finance cost synergies.

Peer group based on FactSet consensus estimates.

Benchmarking Peers

2014 Revenue

($ in millions)

2014 EBITDAR

($ in millions)

The acquisition of Gentiva further strengthens Kindred’s ability to serve patients

across the full continuum of post-acute care

2014 Revenue

($ in millions)

2014 EBITDAR

($ in millions)

Pro Forma

(1)

Pro Forma

(1)

$7,200

$5,200

$3,065

$2,373

$2,000

$1,206

$839

$711

$485

$1,005

$724

$630

$535

$226

$93

$70

$67

$37

Strategic Rationale

Creates leading national provider of diversified and integrated post-acute care

services across the full spectrum of care

Expands and enhances presence in Kindred’s Integrated Care Markets, driving

coordinated care to more communities in a more efficient and cost-effective

manner

Increased financial flexibility, lower cost of capital and substantial cost / revenue

synergies will allow for investment to improve care management, support further

clinical investments and create career opportunities for employees

Combined

company

will

well

positioned

not

just

respond

to,

but

help

shape,

the

evolution

the

American

Healthcare

Delivery

System

Shareholder value creation through significant and immediate premium and

synergies, a meaningful dividend and combined Company’s growth potential

Compelling Value for Gentiva Shareholders

Source: FactSet as of 5/14/2014.

Gentiva Share Price Performance

•

$14.00 per share value represents a substantial premium to its current share price

•

50%

stock

50%

cash

deal

allows

for

investors

participate

the

greater

growth

prospects,

meaningful

dividend and increased financial flexibility of the combined company

•

On an NTM EBITDA multiple basis, this proposal is higher than any multiple Gentiva has traded at over the

previous five years

2.00

6.00

10.00

14.00

$18.00

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Gentiva

Offer Price: $14.00 per share

60-Day VWAP as of 5/14/14: $8.82

39%

Premium

59%

Premium

VWAP Since 5/1/2012: $10.05

$8.54

Current

Price

–

64% premium to May 14, 2014 closing price of $8.54

–

59% premium to the 60-day volume weighted average price

–

Cash election provides opportunity for immediate liquidity

Offer Supported by Wall Street Analysts

Source:

Bloomberg.

Broker

Support for

Combination

Selected Commentary

“Knowing Gentiva management pretty well . . . these really nice people

will ultimately realize that independence is no longer an option and that

it is time to come to the table to meet its new family.”

“Combined entity could create a post-acute titan with the ability to

provide integrated population health management to patients at home.”

“This deal would be a good exit strategy for Gentiva shareholders, as the

company’s several large acquisitions have not translated to returns.”

“Value in expanding the breadth and scope of services throughout the

post-acute space. The greater density and scale will also provide

benefits

uncertainty

remains

with

the

underlying

fundamentals.”

“Over the long term Kindred’s integrated post-acute model could have

strategic

advantages

vs.

Gentiva’s

current

home

based

only

structure”

“This is likely a pretty good deal for Gentiva shareholders given the

execution / reimbursement risks.”

•

Wall Street analysts who cover Gentiva have universally supported our proposal, noting the compelling price delivers

greater value than Gentiva could hope to achieve through its standalone plans and that the combined company would

provide the kind of integrated, patient-centered care that our country and healthcare system need

Kindred Is Helping to Shape the Future

of Healthcare Delivery

•

As the U.S. population ages, demand for patient-centered healthcare is growing

rapidly—and

Kindred

pioneering

integrated

approach

address

this

demand

•

“Continue

The

Care”

strategy delivers the services that patients need across the full

spectrum of care, from inpatient hospitalization to post-acute rehab services to home

and hospice care

•

Kindred is enhancing scale and fostering innovation to provide more communities

with integrated, patient-centered care in the lowest-cost setting

•

Gentiva’s complementary capabilities are one way to advance this strategy

Kindred is at the forefront of healthcare reform: we are implementing a better

model to improve outcomes, smooth care transitions and lower costs

Jefferies 2014 Global Healthcare

Conference

June 2, 2014

Appendix

Hospital Division

$2.5

billion

Revenues

(1)

$533

million

Operating

Income

(2)(4)

Transitional Care Hospitals (certified as LTAC hospitals)

•

100

Transitional

Care

Hospitals

(3)

•

7,324

licensed

beds

(3)

Inpatient Rehabilitation Hospitals (IRFs)

•

IRFs

(3)

•

215

licensed

beds

(3)

(1)

Revenues for the twelve months ended March 31, 2014 (divisional revenues before

intercompany eliminations).

(2)

Operating income for the twelve months ended March 31, 2014.

(3)

As of March 31, 2014.

(4)

Before certain disclosed items.

#2 Operator of Long-Term Acute

Care Hospitals and Inpatient

Rehabilitation Facilities

•

Consistently outperforms national benchmarks on key

quality indicators

•

Sale of 16 facilities to Vibra Healthcare, LLC

—Divestiture of 14 Transitional Care Hospitals, 1 inpatient

rehabilitation hospital and 1 skilled nursing facility

—$180 million of net sales proceeds

•

In Q1 2014, cost per patient day outpaced revenue compared

to Q1 2013, which resulted in an operating income margin

decline

22.3%

from

23.5%

(4)

•

Q1 2014 operating income declined to $147 million versus

$158

million

last

year

(4)

34%

Medicare

Medicaid

Insurance/Other

Revenue

Mix

(1)

60%

117

105

100

120

140

Revenue

Mix

(1)

Nursing Center Division

47 Transitional Care Centers (Sub-Acute facilities

licensed

SNFs)

(3)

13 Nursing and Rehabilitation Centers

(with

Transitional

Care

Units)

(3)

Hospital-Based

Sub-Acute

Units

(3)

Skilled

Nursing

Centers

(Traditional

SNFs)

(3)

•

Challenging operating environment

under RUGs IV rules and ongoing

Medicaid rate pressures

•

Divestiture or non-renewal of 123

nursing centers proceeding toward

completion

•

New Transitional Care Centers

(“TCCs”) and hospital based sub-acute

core growth continuing

•

Division overhead restructuring near

completion, allowing for a smaller, but

more profitable business

•

HCP transaction to acquire real estate

will eliminate $9 million of annual rent

for the Nursing Center Division

39%

33%

28%

Medicaid

Medicare

Private/Other

$1.1

billion

Revenues

(1)

$145

million

Operating

Income

(2)(4)

(1)

Revenues for the twelve months ended March 31, 2014 (divisional revenues before

intercompany eliminations).

(2)

Operating income for the twelve months ended March 31, 2014.

(3)

As of March 31, 2014.

(4)

Before certain disclosed items.

•

2,230 sites of service served through

20,200 therapists

(3)

•

Including 105 hospital-based acute

rehabilitation units

(3)

#1 Contract Rehab Manager

Third Party

Affiliated

•

Provides a compelling value proposition to our Hospital

(HRS) and Skilled Nursing (SRS) partners through

advanced tech systems, clinical programs and highly

trained therapist team

•

Q1 2014 operating margin at 11.4%, showing stability

while implementing significant recent Medicare rule

changes

•

In October 2013, acquired TherEX which provides

on-site, hospital-based rehabilitation services in 11 states

$1.3 billion Revenues

(1)

$144 million Operating Income

(2)(4)

Business

Mix

(1)

HRS

SRS

22%

$0.3 billion

78%

$1.0 billion

(1)

Revenues for the twelve months ended March 31, 2014 (divisional revenues before

intercompany eliminations).

(2)

Operating income for the twelve months ended March 31, 2014.

(3)

As of March 31, 2014.

(4)

Before certain disclosed items.

2,230

1,350

1,000

471

308

1,940

1,042

700

471

290

300

500

1,000

1,500

2,000

2,500

•

Acquired Senior Home Care which operated 47

home health locations throughout Florida and

Louisiana with $143 million in revenue

•

Building management team, including sales,

clinical operations and IT capabilities to support

accelerated expansion

•

While implementation of Homecare Homebase

IT system contributed to performance issues in

2013, all branches (including Senior Home Care)

fully operational and standardized Q1 2014

•

Q1 2014 revenues of $88 million

Including our key affiliates:

•Senior Home Care

•IntegraCare

•Professional Healthcare at Home

•Signature Health Services

•Acclaim Hospice and Palliative Care

•

207 sites of service in 13 states

•

71 in Kindred’s Integrated Care Markets

•

5,000

caregivers serving 17,000 patients on

a daily basis

Care Management Division/Kindred At Home

$356

million

Pro

Forma

Annualized

Revenues

)

Care Management Division and

(1)

Includes historical results of Senior Home Care acquisition, plus Kindred at Home revenues for the twelve

months ended March 31, 2014 (divisional revenues before intercompany eliminations).

Commercial

Insurance/

Other

($71 million)

Private Duty

Hospice

Home Health

Revenue Mix

(1)

Business Mix

(1)

Medicaid

($13 million)

Medicare

($272 million)

76%

20%

80%

15%

2014 Earnings Guidance

($ millions, except statistics)

As of May 7, 2014

As of February 20, 2014

Low

High

Low

High

Operating income

715

732

725

742

Rent

335

338

Depreciation and amortization

163

165

Interest, net

106

Income from continuing operations before income taxes

119

136

116

133

Provision for income taxes

Income from continuing operations

Earnings attributable to noncontrolling interests

(15)

(13)

Income from continuing operations attributable to the Company

Allocation to participating unvested restricted stockholders

(2)

Available to common stockholders

Earnings per diluted share

1.05

1.25

1.05

1.25

Shares used in computing earnings per diluted share

53.2

The earnings guidance excludes the effect of reimbursement changes, severance, retirement and retention costs, litigation

costs, transaction-related costs, any further acquisitions or divestitures, any impairment charges, and any repurchases of

common stock.

Explanation of Non-GAAP Measures

The enclosed presentation includes financial measures referred to as operating income, or earnings before interest, income taxes, depreciation,

amortization and rent. The Company’s management uses operating income as a meaningful measure of operational performance in addition to other

measures. The Company uses operating income to assess the relative performance of its operating divisions as well as the employees that operate these

businesses. In addition, the Company believes this measurement is important because securities analysts and investors use this measurement to compare

the Company’s performance to other companies in the healthcare industry. The Company believes that income (loss) from continuing operations is the

most comparable GAAP measure. Readers of the Company’s financial information should consider income (loss) from continuing operations as an important

measure of the Company’s financial performance because it provides the most complete measure of its performance. Operating income should be

considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of operating performance. A

reconciliation of operating income to income (loss) from continuing operations is provided in the enclosed Appendix.

In addition to the results provided in accordance with GAAP, the Company provides information in the enclosed presentation to compute certain non-GAAP

measurements for the twelve months ended March 31, 2014 and three months ended March 31, 2013 before certain charges or on a core basis. The

charges that were excluded from core operating results are denoted in the tables in the enclosed Appendix.

The use of these non-GAAP measurements are not intended to replace the presentation of the Company's financial results in accordance with GAAP. The

Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods

by excluding certain charges for the twelve months ended March 31, 2014 and three months ended March 31, 2013 that the Company believes are not

representative of its ongoing operations due to the materiality and nature of the charges. The Company's core operating results also represent a key

performance measure for the purpose of evaluating performance internally.

Reconciliation of Non-GAAP Measures

($ in thousands)

First

Twelve

2013 Quarters

Quarter

months ended

First

Second

Third

Fourth

2014

March 31, 2014

Revenues:

Hospital division

671,206

618,598

604,169

616,721

657,453

2,496,941

Nursing center division

275,141

269,501

270,210

274,908

281,572

1,096,191

Rehabilitation division:

Skilled nursing rehabilitation services

257,884

248,710

244,384

242,376

253,285

988,755

Hospital rehabilitation services

74,523

69,777

68,296

74,017

73,964

286,054

332,407

318,487

312,680

316,393

327,249

1,274,809

Care management division

51,621

53,039

53,801

66,466

87,704

261,010

1,330,375

1,259,625

1,240,860

1,274,488

1,353,978

5,128,951

Eliminations:

Skilled nursing rehabilitation services

(29,303)

(29,257)

(28,698)

(28,728)

(30,070)

(116,753)

Hospital rehabilitation services

(24,200)

(23,706)

(22,944)

(22,553)

(23,689)

(92,892)

Nursing centers

(1,213)

(1,001)

(1,161)

(875)

(662)

(3,699)

(54,716)

(53,964)

(52,803)

(52,156)

(54,421)

(213,344)

1,275,659

1,205,661

1,188,057

1,222,332

1,299,557

4,915,607

Income (loss) from continuing operations:

Operating income (loss):

Hospital division

149,698

131,676

113,147

127,898

146,895

519,616

Nursing center division

29,844

36,678

32,146

36,694

39,095

144,613

Rehabilitation division:

Skilled nursing rehabilitation services

12,373

20,686

(8,155)

13,356

17,358

43,245

Hospital rehabilitation services

18,132

19,573

18,215

18,005

19,820

75,613

30,505

40,259

10,060

31,361

37,178

118,858

Care management division

2,786

3,961

1,085

2,131

4,697

11,874

Corporate:

Overhead

(45,585)

(43,196)

(39,157)

(48,557)

(44,050)

(174,960)

Insurance subsidiary

(509)

(384)

(482)

(539)

(406)

(1,811)

(46,094)

(43,580)

(39,639)

(49,096)

(44,456)

(176,771)

Impairment charges

(187)

(438)

(441)

(76,127)

(74)

(77,080)

Transaction costs

(944)

(108)

(613)

(447)

(683)

(1,851)

Operating income

165,608

168,448

115,745

72,414

182,652

539,259

Rent

(77,957)

(78,796)

(78,228)

(82,381)

(82,474)

(321,879)

Depreciation and amortization

(42,249)

(39,228)

(37,190)

(38,361)

(40,210)

(154,989)

Interest, net

(28,084)

(27,609)

(24,399)

(23,906)

(25,624)

(101,538)

Income (loss) from continuing operations

before income taxes

17,318

22,815

(24,072)

(72,234)

34,344

(39,147)

Provision (benefit) for income taxes

6,481

9,160

(7,217)

(20,903)

13,102

(5,858)

10,837

13,655

(16,855)

(51,331)

21,242

(33,289)

Reconciliation

Non-GAAP

Measures

(continued)

($ in thousands)

Twelve months ended March 31, 2014

Severance

Facility

Senior debt

Before

and retirement

closing

Impairment

Transaction

modification

charges

costs

Litigation

charges

costs

charges

Total

Reported

Income (loss) from continuing operations:

Operating income (loss):

Hospital division

533,342

(6,026)

(7,700)

(13,726)

519,616

Nursing center division

144,677

(64)

144,613

Rehabilitation division:

Skilled nursing rehabilitation services

66,534

(139)

(23,150)

(23,289)

43,245

Hospital rehabilitation services

76,989

(1,376)

75,613

143,523

(1,515)

(23,150)

(24,665)

118,858

Care management division

13,002

(676)

(452)

(1,128)

11,874

Corporate:

Overhead

(171,135)

(3,366)

(459)

(3,825)

(174,960)

Insurance subsidiary

(1,811)

(172,946)

(3,366)

(459)

(3,825)

(176,771)

Impairment charges

(998)

(76,082)

(77,080)

Transaction costs

(1,851)

Operating income

660,600

(5,557)

(6,542)

(30,850)

(76,082)

(1,851)

(459)

(121,341)

539,259

Rent

(321,879)

Depreciation and amortization

(154,989)

Interest, net

(100,077)

(1,461)

(101,538)

Income (loss) from continuing operations

before income taxes

83,655

(5,557)

(6,542)

(30,850)

(76,082)

(1,851)

(1,920)

(122,802)

(39,147)

Provision (benefit) for income taxes

29,869

(2,186)

(2,312)

(12,139)

(17,803)

(532)

(755)

(35,727)

(5,858)

53,786

(3,371)

(4,230)

(18,711)

(58,279)

(1,319)

(1,165)

(87,075)

(33,289)

Charges

Reconciliation

Non-GAAP

Measures

(continued)

($ in thousands)

Three months ended March 31, 2013

Charges

Before

One-time

Transaction

charges

bonus

costs

Total

reported

Income from continuing operations:

Operating income (loss):

Hospital division

157,661

(7,963)

149,698

Nursing center division

34,550

(4,706)

29,844

Rehabilitation division:

Skilled nursing rehabilitation services

17,425

(5,052)

12,373

Hospital rehabilitation services

19,387

(1,255)

18,132

36,812

(6,307)

30,505

Care management division

3,619

(833)

2,786

Corporate:

Overhead

(45,270)

(315)

(45,585)

Insurance subsidiary

(509)

(45,779)

(315)

(46,094)

Impairment charges

(187)

Transaction costs

(944)

Operating income

186,676

(20,124)

(944)

(21,068)

165,608

Rent

(77,957)

Depreciation and amortization

(42,249)

Interest, net

(28,084)

Income from continuing operations

before income taxes

38,386

(20,124)

(944)

(21,068)

17,318

Provision for income taxes

15,008

(8,145)

(382)

(8,527)

6,481

23,378

(11,979)

(562)

(12,541)

10,837

Jefferies 2014 Global Healthcare

Conference

June 2, 2014