INVESTOR
 REFERENCE
 BOOK
 Last updated March 6, 2017
     HealthSouth is a leading provider of post-acute healthcare services, offering both facility-based 
    and home-based post-acute services in 34 states and Puerto Rico through its network of 
    inpatient rehabilitation hospitals, home health agencies, and hospice agencies.
 2
 The information contained in this Investor Reference Book includes certain estimates, projections and other
 forward-looking information that reflect HealthSouth’s current outlook, views and plans with respect to future
 events, including legislative and regulatory developments, strategy, capital expenditures, acquisition and other
 development activities, cyber security, dividend strategies, repurchases of securities, effective tax rates,
 financial performance, financial assumptions, business model, balance sheet and cash flow plans, and
 shareholder value-enhancing transactions. These estimates, projections and other forward-looking information
 are based on assumptions HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will
 be differences between such estimates and actual events or results, and those differences may be material.
 There can be no assurance any estimates, projections or forward-looking information will be realized.
 All such estimates, projections and forward-looking information speak only as of the date hereof.
 HealthSouth undertakes no duty to publicly update or revise the information contained herein.
 You are cautioned not to place undue reliance on the estimates, projections and other forward-looking
 information in this Investor Reference Book as they are based on current expectations and general
 assumptions and are subject to various risks, uncertainties and other factors, including those set forth in the
 Form 10-K for the year ended December 31, 2016 and in other documents HealthSouth previously filed with
 the SEC, many of which are beyond HealthSouth’s control, that may cause actual events or results to differ
 materially from the views, beliefs and estimates expressed herein.
 Note Regarding Presentation of Non-GAAP Financial Measures
 The following Investor Reference Book includes certain “non-GAAP financial measures” as defined in
 Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA, leverage ratios,
 adjusted earnings per share, and adjusted free cash flow. Schedules are attached that reconcile the non-
 GAAP financial measures included in the following Investor Reference Book to the most directly comparable
 financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in
 the United States. HealthSouth’s Form 8-K, dated March 6, 2017, to which the following Investor Reference
 Book is attached as Exhibit 99.1, provides further explanation and disclosure regarding HealthSouth’s use of
 non-GAAP financial measures and should be read in conjunction with this Investor Reference Book.
 Forward-Looking Statements
 3
 Table of Contents
 Guidance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-11
 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-26
 Our Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27-32
 Business Outlook: 2017 to 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33-40
 Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41-52
 Alternative Payment Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53-63
 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64-69
 Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70-73
 Operational Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74-79
 Industry Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80-92
 Segment Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93-97
 Reconciliations to GAAP and Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98-112
 End Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113-116
 4
 Guidance 
(as of March 6, 2017)
 5
 Priorities for 2017
 GROWTH
 u Expand network of freestanding inpatient rehabilitation hospitals ("IRFs")
  Demographic trends driving increasing demand for IRF services
  IRFs are best positioned to expand service offering in the progression towards site
 neutrality
  Continue emphasis on joint venture opportunities to enhance positioning in integrated
 delivery models
 u Expand network of home health agencies ($50 million to $100 million of
 acquisitions)
  Demographic trends driving increasing demand for home health services
  Home health will benefit from skilled nursing facility ("SNF") disintermediation
  Continue emphasis on:
  Increasing overlap with HealthSouth's IRFs
  Increasing market density via acquisitions in existing and contiguous home health
 markets
  Selectively acquiring hospice assets to overlap with home health locations
 OPERATIONAL INITIATIVES
 CAPITAL STRUCTURE
 6
 Priorities for 2017
 GROWTH
 CAPITAL STRUCTURE
 OPERATIONAL INITIATIVES
 u Develop and implement initial risk sharing strategies
  Implement collaborator and/or preferred provider agreements in select CJR markets 
(includes SHFFT)
  Design and pilot commercial bundle with select Medicare Advantage plans
 u Enhance clinical collaboration between HealthSouth and Encompass
  Structure and implement                                  initiative to extrapolate best practices across
 all overlap markets
  Utilize Care Transition Coordinators ("CTCs") to implement patient-centered transition plans
 that promote quality, safety and patient choice
 u Refine and expand clinical enhancements to further improve patient outcomes
  Complete installation of EMR and continue in-service upgrades
  Enhance utilization of clinical data analytics strategies
  Refine and expand predictive model to identify patients at risk for acute care transfers
 u Increase stroke market share by further communicating the HealthSouth value
 proposition to acute care hospitals, physicians, and commercial payors
  AHA and ASA guidelines recommend IRF over SNF
  99 of HealthSouth's hospitals hold stroke-specific certifications from The Joint Commission's
 Disease-Specific Care Certification Program.
 u Maintain strength and flexibility of balance sheet
 u Continue to augment returns from investments in operations with shareholder
 distributions
 7 Refer to pages 113-116 for end notes.
 Guidance 
Adjusted EBITDA(1) 
Adjusted Earnings per Share
 from Continuing Operations
 Attributable to HealthSouth(2)
 Net Operating Revenues Net Operating Revenues
 $3,850 million to $3,950 million
 Adjusted EBITDA(1) 
$800 million to $820 million
 Adjusted Earnings per Share
 from Continuing Operations
 Attributable to HealthSouth(2)
 $2.61 to $2.73
 $3,707.2 million
 $793.6 million
 $2.67
 2017
 Guidance
 2016
 Actuals
 8
 Refer to pages xxx-xxx for end notes.
 Adjusted EBITDA(1) Guidance Bridge
 Net Operating Revenues
 $3,xxx million to $3,xxx million
 Adjusted EBITDA(x) 
$8xx million to $8xx million
 Adjusted Earnings per Share
 from Continuing Operations
 Attributable to HealthSouth(x)
 $x.xx to $x.xx
 2017
 2016
 Adjusted EBITDA
 Indirect Medical
 Education Adjustment
 in Q3 2016
 Growth
 from Operations
 Impact
 of 2017
 Home Health
 Rule
 Sale of Pediatric
 Home Health Business
 in Q4 2016
 2017
 Adjusted EBITDA
 Guidance Range
 u 2016 included the benefit of a retroactive indirect medical education (“IME”) adjustment of ~$4
 million, which will not repeat in 2017, at the former Reliant hospital in Woburn, MA.
 u The ~3.6% net pricing reduction to Encompass of the HH-PPS final rule creates an ~$21 million
 headwind to Adjusted EBITDA in 2017.*
 u Sold pediatric home health assets in Q4 2016; Pediatrics generated ~$2 million of Adjusted
 EBITDA in 2016
 u See page 9 for a list of guidance considerations.
 $794
 $800 to
 $820
 $33 to $53
 ($4)
 ($2)
 ($21)(In Millions)
 2016 2017
 * Encompass' expectation for the CY2017 Medicare pricing reduction prior to the release of the HH-PPS rule was ~1.2%.
 Refer to pages 113-116 for end notes.
 9
 Guidance Considerations
 Inpatient Rehabilitation
 u Estimated 1.9% increase in Medicare
 pricing for Q1 through Q3; ~1.0% for Q4
 (see page 35)
 u Salary increase of ~3.0% (see page 36)
 u 2016 included the benefit of a retroactive
 indirect medical education (“IME”)
 adjustment of ~$4 million at the former
 Reliant hospital in Woburn, MA.
 u Bad debt expense of 1.8% to 2.0% of net
 operating revenues
 Home Health and Hospice
 u Estimated 3.6%, or ~$21 million, net
 Medicare pricing reduction for CY 2017
 (see page 35)
 u Salary increase of ~3.0% (see page 36)
 u Estimated incremental cost of $1.0
 million to $1.5 million for the pre-claim
 review demonstration scheduled to begin
 in Florida on April 1, 2017
 u Inclusive of home health and hospice
 acquisitions in 2017 (see page 11)
 u Sale of pediatric home health assets in
 Q4 2016; Pediatrics generated ~$2 million
 of Adjusted EBITDA in 2016
 Consolidated
 u Diluted share count of ~100 million shares
 u Tax rate of approximately 40%
 10 Reconciliations to GAAP provided on pages 98-112. Refer to pages 113-116 for end notes.
 Adjusted Free Cash Flow(3) and Tax Assumptions
 Certain Cash Flow Items
 (millions)
 2015
 Actuals
 2016
 Actuals
 2017
 Assumptions
 • Cash interest expense
 (net of amortization of debt discounts and fees) $128.6 $158.4 $150 to $160
 • Cash payments for taxes, net of
 refunds $9.4 $31.9 $120 to $175
 • Working Capital and Other $69.2 $36.2 $50 to $70
 • Maintenance CAPEX $83.1 $104.2 $130 to $150
 • Dividends paid on preferred
 stock(4) $3.1 $— $0
 • Adjusted Free Cash Flow $389.0 $462.9 $245 to $370
 *  The Company has filed with the IRS for a tax accounting method change related to billings denied under pre-payment claims reviews that, if accepted,
 would replenish the gross federal NOL by ~$130 million. Exhaustion of the federal NOL by year-end 2016 excludes the impact of this filing.
 u Increased cash payments for
 taxes due to exhaustion of
 federal NOL as of 
December 31, 2016*
 u Increased maintenance capital
 expenditures due to growth in
 the Company, enhanced
 hospital maintenance
 program, and leasehold
 improvements and furnishings
 associated with the build-out
 of the Company’s new home
 office location (building will be
 leased)
 11 Note: 2015 amount for debt borrowings included ~$208 million related to the Reliant hospitals' capital lease obligations.See the debt schedule on page 67. Refer to pages 113-116 for end notes.
 Free Cash Flow Priorities
 (In Millions)
 2015 2016 2017
 Actuals Actuals Assumptions
 IRF bed expansions $20.8 $19.1 $30 to $40
 New IRF’s
     - De novos 47.8 72.6 85 to 105
     - Acquisitions 786.2 — TBD
     - Replacement hospitals and other 5.8 11.1 10 to 20
 New home health and hospice acquisitions 200.2 48.1 50 to 100
 $1,060.8 $150.9
 $175 to $265,
 excluding IRF
 acquisitions
 2015 2016 2017
 Actuals Actuals Assumptions
 Debt (borrowings) redemptions, net $(1,060.3) $155.1 $TBD
 Cash dividends on common stock(6) 77.2 83.8 ~$87
 Common stock repurchases 45.3 65.6 TBD
 $(937.8) $304.5 $TBD
 Shareholder
 Distributions
 Growth
 in Core 
Business
 Debt 
Reduction
 Highest Priorit
 y
 The Company has ~$39 million of
 contractual debt repayment obligations in
 2017.(5)
 ~$96 million authorization remaining
 as of December 31, 2016
 Quarterly cash dividend currently set at
 $0.24 per common share
 12
 The Company
 13
 HealthSouth: A Leading Provider of Post-Acute Care
 59% of HealthSouth's IRFs are
 located within a 30-mile radius
 of an Encompass location.
 Inpatient Rehabilitation
 Portfolio - As of December 31, 2016
 123
 Inpatient Rehabilitation Hospitals
 • 37 operate as joint ventures with
 acute care hospitals
 30 Number of States (plus Puerto Rico)
 ~ 28,000 Employees
 Key Statistics - Full Year 2016
 ~ $3.0 Billion Revenue
 165,305 Inpatient Discharges
 640,702 Outpatient Visits
 Note: One of the 123 IRFs and two of the 188 adult home health locations are nonconsolidated.
           These locations are accounted for using the equity method of accounting.
 Encompass 
Home Health and Hospice
 Portfolio – As of December 31, 2016
 188 Home Health Locations
 35 Hospice Locations
 25 Number of States
 ~ 7,700 Employees
 Key Statistics - Full Year 2016
 ~ $686 million Revenue
 185,737 Home Health Episodes
 3,337 Hospice Admissions
 IRF Market Share
 Largest owner & operator of IRFs
 21% of Licensed Beds
 28% of Medicare Patients Served
 Home Health and
 Hospice Market Share
 4th largest provider of
 Medicare-certified skilled
 home health services
 14
 Inpatient Rehabilitation Segment
 Major Services 
• Rehabilitation Physicians: manage and treat medical conditions and oversee rehabilitation program
 • Rehabilitation Nurses: provide personal care and oversee treatment plan for patients
 • Physical Therapists: address physical function, mobility, strength, balance, and safety
 • Occupational Therapists: promote independence through activities of daily living (ADLs)
 • Speech-Language Therapists: address speech/voice functions, swallowing, memory/cognition, and
 language/communication
 • Case Managers: coordinate care plan with physician, caregivers and family
 • Post-Discharge Services: outpatient therapy and Encompass home health and hospice
 Inpatient Rehabilitation
 Hospitals
   Refer to pages 113-116 for end notes. 
101 of HealthSouth's hospitals hold one or more disease-
 specific certifications from The Joint Commission’s
 Disease-Specific Care Certification Program.(7)
 15
 Major Services 
• Skilled Nurses: comprehensively assess, teach, train, and manage care related to injury or illness
 • Home Health Aides: provide personal care and assistance with ADLs
 • Physical Therapists: address physical function, mobility, strength, balance, and safety
 • Occupational Therapists: promote independence through training on self-management of ADLs
 • Speech-Language Therapists: address speech/voice functions, swallowing, memory/cognition, and
 language/communication
 • Medical Social Workers: provide assessment of social and emotional factors; assist with obtaining
 community resources
 Home Health and Hospice Segment (Encompass)
 Home Health Agencies
 Encompass offers a number of evidence-based specialty
 programs related to: Post-Operative Care, Fall Prevention,
 Chronic Disease Management, and Transitional Care.
 Hospice: provides services to terminally ill patients and their families to address patients' physical needs,
 including pain control and symptom management, and to provide emotional and spiritual support.
 16
 States with an Encompass presence
 Encompass Partnership
 • 4th largest provider of Medicare-focused (84%
 Medicare) skilled home health services in the U.S.
 with 223 locations across 25 states
 • Approx. 7,700 employees making 3.9 million total
 patient visits annually
 • Approx. revenue of $686 million for trailing 4
 quarters
  
* A subsidiary of HealthSouth Corporation and doing business as Encompass Home Health and Hospice
 Equity Structure
 HealthSouth EncompassManagement
 HealthSouth
 Home Health
 Holdings, Inc.*
 16.7%83.3%
 Partnership formed December 31, 2014
 17
  Managed Care
  Other               Variety of methodologies
 Per Diem/Visit or CMG/Episodes
   - Negotiated rate
   - Some are “tiered” for acuity/severity
 Per Diem/Visit or CMG/Episodes
   - Negotiated rate
   - Some are “tiered” for acuity/severity
 Prospective Payment System (“PPS”)
  - IRF: Paid per discharge by Case Mix Group (“CMG”)
  - Home Health: Paid per 60-day episode of care by  
   Home Health Resource Group (“HHRG”)
 • An episode is paid in two installments: 
1) Request for Anticipated Payment (“RAP”)
 2) Final bill after episode is complete
 Medicare
 Varies by state
  Medicare Advantage
 Medicaid 
Payors (Q4 2016)
 Payor Source Payment Methodology% of Revenues
 84.3%73.3%
 8.7%
 7.8%
 3.9%
 10.9%
 3.0%
 3.0%5.0% 0.1%
 Inpatient
 Rehab
 Segment
 Home
 Health &
 Hospice
 Segment
 18
 Acute Care Hospitals -- 37%
 Physician Offices / Community -- 34%
 IRFs / LTCHs / SNFs -- 29%
 IRF Patient Mix
 Referral Sources:
 Rehabilitation Impairment Category* (Q4 2016):
 • Physicians and acute care hospital case managers are key
 decision makers.
 • All IRF patients must meet reasonable and necessary criteria and
 must be admitted by a physician.
 • All IRF patients must be medically stable and have potential to
 tolerate three hours of therapy per day (minimum).
 • IRF patients receive 24-hour, 7 days a week nursing care.
 • Average length of stay = 12.8 days
 Admission to an IRF:
 Average Age of a HealthSouth Patient: 
All Patients = 71    Medicare FFS = 76
 RIC 01 Stroke 18.0%
 RIC 02/03 Brain dysfunction 9.8%
 RIC 04/05 Spinal cord dysfunction 3.9%
 RIC 06 Neurological conditions 20.3%
 RIC 07 Fracture of lower extremity 8.2%
 RIC 08 Replacement of lower extremity joint 4.8%
 RIC 09 Other orthopedic 9.8%
 RIC 10/11 Amputation 2.5%
 RIC 14 Cardiac 4.4%
 RIC 17/18 Major multiple trauma 5.6%
 RIC 20 Other disabling impairments 9.8%
 — All other RICs 2.9%
 Home Health Patient Mix
 Acute Care Hospitals -- 92%
 Physician Offices / Community -- 7%
 Skilled Nursing Facilities -- 1%
 Referral Sources:
 • For Medicare, a patient must be confined to the home and need
 skilled services.
 • The patient must be under the care of a physician and receive
 services under a home health plan of care established and
 periodically reviewed by a physician.
 • Medicare also requires a face-to-face encounter related to the
 primary reason the patient requires home health services with a
 physician or an allowed non-physician practitioner.
 Admission to home health:
 Average Age of an Encompass Patient: 
All Patients = 76    Medicare FFS = 77
 100
 90
 80
 70
 60
 50
 40
 30
 20
 10
 Pe
 rc
 en
 ta
 ge
 24.0%
 36.7% 31.9%
 85.1%
 Age 85+ Lives
 alone
 Has 2 or
 more ADL
 limitations
 Has 3 or 
more chronic
 conditions
 Demographics of all Medicare Home Health Users**:
 * Rehabilitation Impairment Categories (RICs) represent how HealthSouth admitted the patient; BPCI/CJR (pages 55-62) 
  uses Diagnostic-Related Groups (DRGs) which represent how the acute care hospital discharged the patient. 
** Source: Avalere Health and Alliance for Home Health Quality and Innovation Home Health Chart Book 2015
 19
 2014 2015 2016
 10.6% 10.6%
 10.4%
 10.7% 10.6% 10.7%
 2014 2015 2016
 14.5% 13.9% 13.1%
 11.4% 10.7% 10.1%
 2014 2015 2016
 74.4% 75.2%
 75.7%
 77.1% 78.0%
 78.7%
 Home Health QualityIRF Quality
 Discharge to Community 
Discharge to Skilled Nursing 
Discharge to Acute Hospital 
Percent of cases
 discharged to
 the community,
 including home
 or home with
 home health. 
Higher is better.
 Percent of
 patients
 discharged to a
 skilled nursing
 facility. 
Lower is better.
 Percent of
 patients
 discharged to an
 acute care
 hospital. 
Lower is better.
 Refer to pages 113-116 for end notes.
 3.8
 3.2
 Quality of Care
 Star Ratings(9)
 99% of Encompass' home health
 agencies are 3 Stars or higher;
 50% are 4 Stars or higher
 3.6 3.6 Patient Satisfaction 
Star Ratings(9)
 96% of Encompass' home health
 agencies are 3 Stars or higher;
 60% are 4 Stars or higher
       Encompass            National Average
 16.1%
 16.9%
 30-Day 
Readmission Rate
  Percent of patients readmitted
 to an acute care hospital. 
Lower is better.
 80 bps bette
 r
       UDSMR(8)                 HealthSouth
 Leading Positions in Quality of Care
 20
 Independent Research Concludes IRFs are a Better
 Rehabilitation Option for Stroke Patients than SNFs
 “If the hospital suggests sending your loved one to
 a skilled nursing facility after a stroke, advocate
 for the patient to go to an inpatient
 rehabilitation facility instead...”*
 “Whenever possible, the American Stroke
 Association strongly recommends that stroke
 patients be treated at an inpatient rehabilitation
 facility rather than a skilled nursing facility. While in 
an inpatient rehabilitation facility, a patient participates in at least
 three hours of rehabilitation a day from physical therapists,
 occupational therapists, and speech therapists. Nurses are
 continuously available and doctors typically visit daily.”*
 *
 **
 AHA/ASA press release, "Inpatient rehab recommended over nursing homes for stroke rehab," 
issued May 4, 2016 (newsroom.heart.org)
 "Guidelines for Adult Stroke Rehabilitation and Recovery," issued May 2016 (stroke.ahajournals.org)
 “The studies that have compared outcomes in hospitalized stroke
 patients first discharged to an IRF, a SNF, or a nursing home have
 generally shown that IRF patients have higher rates of return
 to community living and greater functional recovery,
 whereas patients discharged to a SNF or a nursing home have higher
 rehospitalization rates and substantially poorer survival.”**
 99 of HealthSouth's IRFs hold The Joint
 Commission's Disease-Specific Care
 Certification in Stroke Rehabilitation.
 21
 Leading Position in Cost Effectiveness(10) - IRFs
 Medicare pays
 HealthSouth less
 per discharge,
 on average, and
 HealthSouth
 treats a higher
 acuity patient.
 Avg.
 Beds
 per IRF
 Avg.
 Medicare
 Discharges
 per IRF(12)
 Case
 Mix
 Index(13)
 Avg. Est.
 Total Cost
 per
 Discharge
 for FY 2017
 Avg. Est.
 Total
 Payment
 per
 Discharge
 for FY 2017
 HLS(11) = 119 68 956 1.25 $12,645 $19,371
 Free-
 Standing
 (Non-HLS) =
 144 57 582 1.23 $16,653 $20,248
 Hospital
 Units = 870 24 234 1.18 $19,879 $20,551
 Total 1,133 33 354 1.21 $17,152 $20,153
 The average estimated total payment per discharge, as stated, does not reflect a 2% reduction for sequestration.(14) 
Refer to pages 113-116 for end notes. 
 
HealthSouth differentiates
 itself by:
  “Best Practices” clinical
 protocols
  Supply chain
 efficiencies
  Sophisticated
 management information
 systems
  Economies of scale
 22
 2015 AverageRevenue Visits
 Effective
 Revenue Cost
 Episodes per Episode per Episode per Visit per Visit
 Encompass 137,568 $3,072 19 $162 $72
 Public Peer
 Average 259,215 $2,732 17* $161 $84*
 Encompass
 Compared to
 Peer Average
 12.4% 11.8% 0.6% (14.3)%
 Leading Position in Cost Effectiveness - Home Health
 Public peer average represents 2015 data from publicly traded home health providers.
 * One publicly traded company (Kindred) does not report visit counts. 
Encompass' average
 revenue per episode
 is 12.4% higher due
 to higher acuity
 patient mix.
 Encompass' cost per
 visit is 14.3% lower
 due to market
 density & operational
 efficiency:
  Caregiver
     optimization
  Full utilization of
     Homecare  
    Homebase (HCHB)
  Employee culture
 of excellence
  ~76% of visits 
    conducted
     by full-time staff
  Daily monitoring of 
    productivity
 23
 IRF New-Store/Same-Store Growth
 * Includes consolidated HealthSouth inpatient rehabilitation hospitals classified as same store during each period
 Refer to pages 113-116 for end notes.
 25.0
 20.0
 15.0
 10.0
 5.0
 0.0
 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
 Fairlawn(15) 0.6% 1.9% 1.9% 2.0% 1.1%
 New Store 2.0% 1.0% —% 0.6% 1.8% 4.4% 5.7% 15.6% 14.2% 11.7% 10.7% 1.3%
 Same Store* 0.4% 1.4% 1.9% 2.2% 2.9% 2.8% 3.9% 3.0% 2.8% 1.9% 1.9% 0.1%
 Total by Qtr. 2.4% 3.0% 3.8% 4.7% 6.7% 8.3% 9.6% 18.6% 17.0% 13.6% 12.6% 1.4%
 Total by Year 3.5% 10.9% 10.8%
 Same-Store
 Year* 1.3% 3.2% 1.7%
 Same-Store
 Year UDS(16) (0.2)% 1.3% (0.6)%
 Altamonte Springs, FL (50 beds)
 Johnson City, TN (26 beds)
 Newnan, GA (50 beds)
 Middletown, DE (34 beds) 
Reliant (857 beds)
 Franklin, TN (40 beds)
 Lexington, KY (158 beds)
 Savannah, GA (50 beds)
 Hot Springs, AR (40 beds)
 Bryan, TX (49 beds)
 Broken Arrow, OK (22 beds)
 Modesto, CA (50 beds)
 24
 70.0
 60.0
 50.0
 40.0
 30.0
 20.0
 10.0
 0.0
 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
 Home Health New-Store/Same-Store Growth
 Admissions Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
 New Store 11.9% 13.6% 15.7% 37.4% 43.5% 41.6% 35.4% 8.1%
 Same Store* N/A N/A N/A N/A 12.6% 11.1% 15.3% 14.0%
 Encompass owned
 locations** 10.9% 8.7% 10.3% 15.0% N/A N/A N/A N/A
 Total by Qtr. 22.8% 22.3% 26.0% 52.4% 56.1% 52.7% 50.7% 22.1%
 Total by Year 31.4% 43.6%
 Same-Store Year* N/A 13.7%
 Encompass owned
 locations Year** 11.2% N/A
 * Includes consolidated Encompass home health agencies classified as same store during each period
 ** Includes admissions for locations Encompass owned prior to HealthSouth 
acquisition on December 31, 2014, and HealthSouth's legacy agencies
 Acquired CareSouth 
(44 home health agencies in 7 states)
 Note: In addition to completing the CareSouth acquisition, in 2015, Encompass opened four home health locations and acquired ten home
 health locations.  In 2016, Encompass opened three home health locations and acquired seven home health locations.
 25
 Adjusted EPS(2)
 Track Record
 2012 2013 2014 2015 2016
 $2,162 $2,273
 $2,406
 $3,163
 $3,707($ millions)
 2012 2013 2014 2015 2016
 $506
 $552
 $578
 $683
 $794
 ’12-’16 CAGR = 
11.9
 %($ millions)
 ’12-’16 CAGR = 14.4
 %
 Adjusted EBITDA(1)
 2012 2013 2014 2015 2016
 $1.61
 $1.94
 $2.06
 $2.24
 $2.67
 ’12-’16 CAGR =  13.5
 %
 2012 2013 2014 2015 2016
 $268
 $331
 $311
 $389
 $463
 Adjusted Free Cash Flow(3)
 ($ millions)
 ’12-’16 CAGR = 14.7
 %
 Revenue
  Reconciliations to GAAP provided on pages 98-112. Refer to pages 113-116 for end notes.
 CAGR = Compound annual growth rate; the average growth rate over a period of years.
 26
 • Largest provider of inpatient rehabilitation services
 • 4th largest provider of Medicare-certified skilled home health services
 • Consistent delivery of high-quality, cost-effective care
 • Enhanced utilization of technology (e.g., clinical, data management,
 and technology-enabled business processes)
 HLS: Strong and Sustainable Business Fundamentals
 • Effective labor management
 • Continued improvements in supply chain
 • Economies related to scale and market density
 Cost-Effectiveness
 • Strong balance sheet and liquidity, no significant near-term maturities
 (credit agreement matures in 2020; bonds mature in 2023 and beyond)
 • Substantial free cash flow generation
 • Attractive organic growth opportunities in both segments 
• Flexible inpatient rehabilitation de novo and acquisition strategy
 • Home health and hospice platform with track record of growth through
 acquisitions in highly fragmented industry segments
 • Portfolio of 123* IRFs as of December 31, 2016
 P 85 owned and 38 leased
 Real Estate Portfolio
 Attractive Healthcare Sectors
 Growth Opportunities
 Cost-Effectiveness
 • Favorable demographic trends
 • Nondiscretionary nature of many conditions treated 
• Highly fragmented post-acute industries present significant acquisition
 and joint venture opportunities
 Industry Leading Position
 Financial Strength
 * Includes one nonconsolidated entity.
 27
 Our Strategy
 28
 Both Segments Benefit from a Demographic Tailwind:
 Expanding Medicare Beneficiary Population
      Key Observations:
 • The growth rate of Medicare beneficiaries
 increased in 2011 to an approx. 3% CAGR
 as “baby boomers” started turning 65. 
• In 2030, the Medicare population is projected
 to increase to 81 million beneficiaries from
 55 million beneficiaries today.
 Source: www.census.gov/population/projections/files/summary/NP2014-T9.xls; Center for Medicare & 
             Medicaid Services, Medicare Trustees Report - June 2016 - pages 186, 191
 Average Age of HealthSouth Patients
 IRF Home Health
 < 65 years 29% 11%
 65 to 69 years 13% 11%
 70 to 74 years 13% 13%
 75 to 79 years 14% 15%
 80 to 84 years 14% 17%
 85 to 89 years 11% 17%
 > 90 years 6% 16%
 29
 CMS: Driving Change Toward Integrated Delivery Payment
 Models, Value-Based Purchasing, and Site Neutrality
 Future Post-Acute Providers (Timing?)
  Inpatient Rehabilitation Facilities
 • Full range: low acuity g high acuity
 • 24/7 nursing coverage
 • Eliminates payment silos
 Home-Based Post-Acute Services
 • More care in the home 
(lowest cost setting)
 • Differentiator: Ability to care for high-acuity,
 poly-chronic patients
 >> 50% of Medicare fee-for-service
 payments via integrated delivery
 payment models 
>> 90% of Medicare fee-for-service
 payments tied to quality/value
  Integrated Delivery 
   Payment Models
  Value-Based
    Payments
 • Site Neutrality
 Current Post-Acute Providers
 • Medicare payments/regulations will be
 outcome focused.
 • Many existing regulations will become
 obsolete.
 Facility-Based Post Acute Services
 >> 30% of Medicare fee-for-service
 payments via integrated delivery
 payment models (e.g., bundled
 payments; accountable care
 organizations (ACOs))
 >> 85% of Medicare fee-for-service
 payments tied to quality/value (i.e.,
 value-based purchasing,
 readmissions reduction programs)
 20172016
 Source: Health and Human Services Fact Sheet announcing new reimbursement goals - January 26, 2015
 CMS
 Goals
 2018 2019
 CMS
 Goals
  Skilled Nursing Facilities
  Home Health
  Long-Term Acute Care Hospitals
 • Medicare payments/regulations are site
 specific (e.g., 60% Rule, 3-Hour Rule,
 "preponderance" of one-to-one therapy).
 30
  
      Always Available
        Sometimes Available
        Seldom Available
 Therapy
 Gym &
 Training
 Systems for
 All PAC
 Patients
 Staff Trained
 for All Acuity
 Therapy
 Gym &
 Training
 Systems for
 All PAC
 Patients
 Staff Trained
 for All Acuity
 Therapy
 Gym &
 Training
 Systems for
 All PAC
 Patients
 Staff Trained
 for All Acuity
 LTACs HealthSouth IRFs SNFs
 Encompass
 Home Health
 HealthSouth’s rehabilitation hospitals have the physical construct, clinical
 staffing, and operating expertise to “pivot from the center” to address the full
 spectrum of inpatient post-acute needs in a site neutral environment. 
HealthSouth is Well-Positioned for the Progression Towards Site Neutrality as It Will
 be Able to Treat All Types of Post-Acute Patients by Leveraging Its Operational
 Expertise Across Its Network of Facility-Based and Home-Based Assets.
 Higher acuity patients will
 transition from HealthSouth
 post-acute inpatient
 facilities to Encompass
 Home Health.
 Lower acuity patients will
 go directly to Encompass
 Home Health.
 Post-Acute Inpatient Spectrum
 Higher Acuity Lower Acuity
 Progression to Site Neutrality
    HealthSouth's Post-Acute Inpatient Facilities
 Presen
 t
 Futur
 e
 31
 IRF-Home Health Clinical Collaboration (All Payors)
 Q4 2015 Q4 2016
 10,360 10,074
 2,735 3,963
 20.9%
 Collaboration Rate
 28.2%
 Collaboration Rate
 HealthSouth IRF Discharges to Non-
 Encompass Home Health
 HealthSouth IRF Discharges to
 Encompass Home Health
 Clinical collaboration rate with
 HealthSouth IRFs increased by
 730 basis points over Q4 2015
 u Overlap markets are defined as a
 HealthSouth IRF located within a 30-
 mile radius of an Encompass
 location
 u Currently, 59% of HealthSouth’s
 IRFs are located within overlap
 markets.
 u The Company’s clinical
 collaboration rate goal for overlap
 markets is 35% to 40% within the
 next three years.
 Overlap Markets
 32
 Solution:
 Utilize extensive proprietary
 database of IRF patients to
 engage in predictive modelling to
 identify patients at risk 
for acute care transfer and
 implement intervention strategies
 as part of the plan of care.
 Solution:
 Standardize and improve
 infection control practices across
 the company in order to reduce
 the risk of infection to patients
 and apply evidenced-based
 decision making in our hospitals.
 Solution:
 Develop clinical protocols and
 coordinated discharge planning between
 IRFs and home health agencies;
 structure and implement TeamWorks
 initiative to extrapolate best practices and
 standardize across all overlap markets;
 and use CTCs to implement patient-
 centered transition plans that promote
 quality, safety and patient choice. 
Problem:
 Acute care transfers can
 negatively influence patient
 outcomes and result in
 unnecessary health care
 expenditures and penalties.
 Problem:
 Healthcare-associated infections
 (HAI) are a threat to patient
 safety and add to growing
 healthcare costs.
 Problem:
 Poor coordination of the discharge
 process between healthcare
 providers can result in challenges
 with the transition of care,
 unnecessary duplication of services,
 and avoidable medical errors.
 Clinical Initiatives to Further Improve Quality
 Reduce Acute Care Transfers
 (tracked in the IRF QRP*) Infection Control Clinical Collaboration
 * IRF Quality Reporting Program
 33
 Business Outlook
 2017 to 2019
 (as of March 6, 2017)
 34
 • Same-store IRF growth
 • New-store IRF growth (de novos and acquisitions)
 • Same-store home health and hospice growth
 • New-store home health and hospice growth (acquisitions)
 Core
 Growth
 Strong
 Balance Sheet
 Key 
Operational
 Initiatives
 Shareholder
 Distributions
 Opportunistic
 Growth
 Business Outlook 2017 to 2019*
 2017 2018 2019
 Business Model
 • Adjusted EBITDA CAGR: 5% - 9%** 
• Strong free cash flow generation
 • Quarterly cash dividends
 • Opportunistic repurchases
 -  (~$96 million authorization remaining as of December 31, 2016)
 • Develop and implement risk sharing strategies
 • Enhance clinical collaboration between HealthSouth and Encompass
 • Refine and expand clinical data analytics utilization to further improve patient outcomes
 • Leverage clinical expertise to increase stroke admissions
 • Complete installation of EMR and enhance utilization via continuous in-service upgrades
 • Target leverage of 3.5x to
 3.8x by year-end, subject to
 opportunities for creating
 shareholder value
 Strategy Componen
 t
 • Consider acquisitions of other complementary businesses
 • Target leverage of 3.5x or less, subject to opportunities for
 creating shareholder value
 * If legislation affecting Medicare is passed, HealthSouth will evaluate its effect on its business model.
 ** This is a multi-year CAGR; annual results may fall outside the range.
 35
 • 10% to15% annual episode
 growth
 • Includes $35-$40 million per 
annum in agency acquisitions
 Volume
 (Includes New Stores)
 Inpatient Rehabilitation Home Health & Hospice
 Medicare Pricing
 Approx. 73% of Revenue Approx. 83% of Revenue
 FY 2017
 Q416-Q317
 FY 2018
 Q417-Q318(17)
 FY 2019
 Q418-Q319
 Mgmt. Estimate
 CY 2017
 Q117-Q417
 CY 2018
 Q118-Q418(17)
 CY 2019
 Q119-Q419
 Mgmt. Estimate
 Market basket update 2.7% 1.0% 3.3% 2.8% 1.0% 3.1%
 Healthcare reform reduction (75) bps - (75) bps - - -
 Healthcare reform rebasing
 adjustment - - - (2.3%) -
 Coding intensity reduction - - - (0.9%) (0.9%) -
 Expiration of rural add-on - - - - Approx.(0.7%) -
 Healthcare reform productivity
 adjustment  (30) bps - (100) bps  (30) bps - (100) bps
 Net impact - all providers 1.65% 1.0% 1.55% (0.7%) (0.6%) 2.1%
 Outlier fixed dollar loss adjustment - - - (0.1%) - -
 Impact from case mix re-weighting - - - (0.9%) - -
 Impact from change in outlier
 calculation - - - (1.9%) - -
 Estimated impact to HealthSouth(18) 1.9% (3.6%)
 Medicare Advantage 
& Managed Care Pricing
 Approx. 19% of Revenue Approx. 13% of Revenue
 Expected Increases 2-4% 2-4% 2-4% 0-2% 0-2% 0-2%
 Business Outlook 2017 to 2019: Revenue Assumptions
 • 3+% annual discharge growth • 10+% annual episode growth
 Refer to pages 113-116 for end notes.
 36
 Inpatient Rehabilitation Home Health and Hospice
 Business Outlook 2017 to 2019: Labor and Other Expense Assumptions
 Salaries 
& Benefits
 ~70%
 Hospital
 Expenses
 ~30%
 Salaries and Benefits 2017 2018 2019
 Salary increases 2.75-3.25% 2.75-3.25% 2.75-3.25%
 Benefit costs increases 5-10% 5-10% 5-10%
 Hospital Expenses
 • Other operating expenses and supply
 costs tracking with inflation
 Salaries 
& Benefits
 ~85%
 Other
 Expenses
 ~15%
 Home Health Expenses
 • Other operating expenses and supply
 costs tracking with inflation
 Percent of Salaries & Benefits
 Salaries ~ 90%
 Benefits ~10%
 37
 CMS:
 • Adopted four new claims-based quality reporting measures beginning
 October 1, 2016 to satisfy the reporting requirements of the IMPACT Act:  
–  Discharge to Community; 
–  Medicare Spending Per Beneficiary; 
–  Potentially Preventable 30-Day Post-Discharge Readmission 
          Measure; and 
–  Potentially Preventable Within Stay Readmission Measure.    
• Adopted one new assessment-based quality measure beginning
 October 1, 2018:  Drug Regimen Review Conducted with Follow-Up for
 Identified Issues.  
IRF-PPS Fiscal Year 2017 Final Rule: Key Provisions
 New Quality Reporting
 Update to Payment Rates
 Company Observations
 Pricing: 
• Net pricing impact to HealthSouth
 expected to be an increase of
 approx. 1.9% for FY 2017 
(see page 35)
 • Because of its efficient cost
 structure, HealthSouth receives
 very few outlier payments despite
 higher acuity patients 
(see page 92). 
Quality:
 • HealthSouth will supplement
 existing quality reporting systems
 to meet the new requirements.
 The final rule:
 • Implemented a net 1.65% market basket increase
           –  2.7% market basket increase 
–  (75 bps) Affordable Care Act reduction 
–  (30 bps) Affordable Care Act productivity reduction 
• Updated the outlier threshold
 • Updated wage index values and continued the second year of a 3-year
 phase in for IRFs transitioning from rural to urban designations
 Source: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-18196.pdf
 38
 Pricing: 
• Net pricing impact to Encompass
 expected to be a reduction of
 approx. 3.6% for CY 2017 
(see page 35)
 • The final rule requires the
 recalibration of case-mix weights and
 the conversion of outlier payments to
 a per-unit methodology to be budget
 neutral for the industry. However,
 these changes will have a
 disproportionate impact on
 Encompass based on its patient mix.
     Quality:
 • Encompass will supplement
 existing processes and systems to
 meet the new requirements.
 HH-PPS Calendar Year 2017 Final Rule: Key Provisions
 New Quality Reporting
 Update to Payment Rates
 Company ObservationsThe final rule:
 • Implemented a net 2.5% market basket increase
            – 2.8% market basket increase 
– (30 bps) Affordable Care Act productivity reduction 
• Implemented the final year of the four-year phase-in of the ACA mandated
 rebasing adjustment. The net rebasing reduction is approximately (2.3%).
 • Implemented the second year of a three-year nominal case-mix coding
 intensity reduction adjustment of (0.9%)
 • Updated the outlier fixed-dollar loss ratio from 0.45 to 0.55
 • Recalibrated the case-mix weights to reflect current home health resource
 use and changes in utilization patterns
 • Converted outlier payments from a "per-visit" to a "per-unit" methodology,
 with “per-visit” rates converted into 15 minute “per-unit” rates
 CMS:
 • Adopted, for the CY 2018 payment determination, four measures to meet the
 requirements of the IMPACT Act:
  – Medicare Spending per Beneficiary (Claims Based);
  – Discharge to Community (Claims Based);
  – Potentially Preventable 30-Day Post-Discharge Readmission Measure
 (Claims Based); and 
 – Drug Regimen Review Conducted with Follow-Up for Identified Issues
 (Patient Assessment Based)
 • Removed 28 quality measures, beginning with CY 2017, and 6 process
 measures, beginning with CY 2018, due to CMS determining these measures
 have been “topped-out”
 Source: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-26290.pdf
 39
 Home Health Pre-Claim Review Demonstration
 State Start Date EncompassAgencies
 Illinois August 3, 2016 —
 Florida* April 1, 2017 17
 Texas To be determined 52
 Michigan To be determined —
 Massachusetts To be determined 2
 Encompass is well-prepared.
 * Encompass estimates the incremental cost of implementation will be $1.0 million to $1.5 million in 2017.
 Source: CMS Pre-Claim Review Demonstration Overview - July 2016
 • Clinical team reviewed all
 documentation requirements
 and workflow
 • Added features in HCHB to
 minimize the administrative 
burden and make electronic
 submission of data easier
 • Worked with physicians to
 ensure consistency between
 their supporting documentation
 and Encompass supporting
 documentation 
Q. What is a pre-claim review?
 A.
 Pre-claim review is a process through which a
 home health agency must submit documentation
 to support medical necessity for each episode to
 the Medicare Administrative Contractor prior to
 billing the final claim.
 Q. What is the goal of the demonstration?
 A.
 CMS is testing methods for identifying,
 investigating, and prosecuting Medicare fraud
 occurring in the home health industry by trying to
 ensure applicable coverage and coding rules are
 met before the final claim is submitted.
 Q. How long is the demonstration?
 A. Three years
 Q. Who is involved?
 A.
 All home health agencies who are located in and
 render services to Medicare fee-for-service
 beneficiaries in Illinois, Florida, Texas, Michigan
 and Massachusetts.
 40
 IMPACT Act of 2014 - Enacted October 6, 2014
   
Company observations and considerations with respect to the IMPACT Act: 
▪ It was developed on a bi-partisan basis by the House Ways and Means and Senate Finance Committees and
 incorporated feedback from healthcare providers and provider organizations that responded to the
 Committees’ solicitation of post-acute payment reform ideas and proposals. 
▪ It directs the United States Department of Health and Human Services (“HHS”), in consultation with healthcare
 stakeholders, to implement standardized data collection processes for post-acute quality and resource use
 measures.  
▪ Although the IMPACT Act does not specifically call for the implementation of a new post-acute payment
 system, the Company believes this act will lay the foundation for possible future post-acute payment policies
 that would be based on patients’ medical conditions and other clinical factors rather than the setting where the
 care is provided. 
▪ It will create additional data reporting requirements for the Company’s hospitals(19) and home health agencies.
 The precise details of these new reporting requirements, including timing and content, will be developed and
 implemented by the Centers for Medicare and Medicaid Services through the regulatory process that the
 Company expects will take place over the next several years.
 ▪ While the Company cannot quantify the potential financial effect of the IMPACT Act on HealthSouth, the
 Company believes any post-acute payment system that is data driven and focuses on the needs and
 underlying medical conditions of post-acute patients will be positive for providers who offer high-quality, cost-
 effective care. HealthSouth believes it is doing just that and expects this act will be positive for the Company. 
▪ However, it will likely take years for the quality data to be gathered, standardized patient assessment data to
 be assembled and disseminated, and potential payment policies to be developed, tested and promulgated. As
 the nation’s largest owner and operator of inpatient rehabilitation hospitals, HealthSouth looks forward to
 working with HHS, the Medicare Payment Advisory Commission and other healthcare stakeholders on these
 initiatives.
 Source: https://www.govtrack.us/congress/bills/113/hr4994/text
 Refer to pages 113-116 for end notes.
 41
 Growth
 42
 1,600
 1,400
 1,200
 1,000
 800
 600
 400
 200
 0
 130
 125
 120
 115
 110
 105
 100
 95
 90
 85
 80
 75
 70
 2012 2013 2014 2015 2016 Projected
 2017
 % Increase in licensed beds 3% 4% 18% 1% 4%
 Total number of licensed beds 6,656 6,825 7,095 8,404 8,504* 8,853
 Total number of IRFs 100 103 107 121 123* 127
 Multi-faceted IRF Growth Strategy
 De Novos
    Acquisitions
 Bed Expansions
 Total IRFsNew Beds
 2016 bed count
 increase
  Modesto, CA (50 beds)
  Hot Springs, AR (40 beds)
  Bryan, TX (49 beds)
  Broken Arrow, OK (22 beds)**
  Bed expansions (83 beds)
 ** Broken Arrow, OK was a 22-bed acquisition completed in Q3 2016 and began operations at its existing 
    location. A new 40-bed hospital is being constructed (+18 beds) and operations will move to the new 
    location once the hospital is completed (expected Q3 2017). 
2017 projected bed
 count increase
  Broken Arrow, OK (18 beds)**
  Pearland, TX (40 beds)
  Westerville, OH (60 beds)
  Jackson, TN (48 beds)
  Gulfport, MS (33 beds)
  Bed expansions (~150 beds)* 2016 total number of licensed beds and total number of IRFs includes the disposal of 61 beds at 
  Beaumont, TX (sold June 2016) and 83 beds at Austin, TX (closed August 2016 ).
 Wholly Owned and Joint 
Venture
 s
 43
 Disciplined Approach to New Store Growth
  
–   $7.4 Billion Medicare IRF Market   – 
Considerations:
 – Demographics
 – Forecasted growth in the number of patients requiring rehab-
 level of care
 – Presence of other IRFs; SNFs
 – Bed need
 – Geographic proximity to other HLS IRFs and Encompass
 agencies
 – Ability of Encompass to enter the market
 – Willingness of seller(s)
 – Potential joint venture partners
 – HLS confidence in ability to close
 Source: MedPAC December 2016 Public Meeting presentation
 CA = confidentiality agreement
 IRF Growth Pipeline
 Typical Development Pipeline
 Factors:
 • CON process/timeline
 • Fair market valuation of contributed assets (joint
 ventures only)
 • Partnership complexities
 HLS Value Proposition
 CAPEX to build free-standing IRF, freeing up space for
 medical/surgical beds in an acute care facility for a JV
 partner
 Enhance the position of the acute care hospital to meet
 quality requirements and effectively participate in
 alternative payment models
 Increased acute care hospital flow-through by taking
 appropriate higher acuity patients faster than other post-
 acute settings
 Proprietary rehabilitation-specific clinical information
 system ("ACE-IT") integrated with acute care hospitals'
 clinical information systems to facilitate patient transfers,
 reduce readmissions, and enhance outcomes
 Proprietary real-time performance management systems
 (care management, labor productivity, quality reporting,
 therapy analysis and expense management) to ensure
 appropriate clinical oversight and improve profitability
 Proven track record of efficient management of regulatory
 process (CON, licensure, occupancy, etc.)
 Experienced transaction/integration team
 National leader in post-acute policy activities
 Partnership with Encompass facilitates clinical
 collaboration
 No. of Projects
 Exploratory /
 CA Executed
 30 - 40
 Actively
 Working
 10 - 12
 Near-term
 Actionable
 4 - 6
 44
 •
 • HealthSouth's IRF joint ventures began in 1991 with Vanderbilt University Medical Center.
 • HealthSouth's joint venture hospital partners own equity that ranges from 2.5% to 50%.
 • 36 of 37 hospitals are consolidated joint ventures, with one accounted for under the equity
 method.
 IRF Acute Care Joint Venture Partnerships
 37* joint venture hospitals in place with major healthcare systems such as:
    Joint ventures with acute care hospitals establish a solid foundation for clinical collaboration 
   and alternative payment models.
 • Barnes-Jewish • Monmouth Medical Center (Barnabas Health)
 • University of Virginia Medical Center • Yuma Regional Medical Center
 • Vanderbilt University Medical Center • Mercy Health System
 • Geisinger Health System • Maine Medical Center
 • Martin Health System • Methodist Healthcare-Memphis Hospitals,
 a subsidiary of Methodist Le Bonheur Healthcare
      * Excludes joint venture hospitals that have been announced but were not operational as of December 31, 2016:
 Jackson, TN; Westerville, OH; Winston-Salem, NC; Murrells Inlet, SC; Little River, SC; and Gulfport, MS.
 45
 New IRFs: Illustrative De Novo Timeline 
Day 1
 With CON Permitting
 & Design
 Planning
 & Zoning Groundbreaking
 Permitting
 & Design
 Planning
 & Zoning Groundbreaking
 Day 1
 Without CON
 6 months to 3 years 20 months
 CON Process Construction
 Construction
 Opening
 Month 20
 Opening
 In California, the design and permitting process can take more than 12 months.
 46
 Investment Considerations
 • IRR objective of 13% (after tax) 
• Includes CON costs (where applicable)
 • Includes cost of CIS installation
 • May be structured through a joint venture
 • Prototype includes all private rooms
 • Minimum of 30 patients treated for zero revenue
 (Medicare certification)
 • Core infrastructure of building anticipates future
 expansion; potential to enhance returns with future
 bed expansion
 Capital Cost  (millions)                                   Low           High Operational Date Location Beds
 Construction, design, permitting, etc. $17 $21
 2018 Murrieta, CA 50
 2017 Bryan, TX 30
 2017 Jackson, TN(34) 48
 Land 2 3 Q1 2017 Westerville, OH 60Q4 2016 Broken Arrow, OK(34) 40
 Equipment (including CIS) 3 4
 Q2 2016 Hot Springs, AR(34) 40
 Q2 2016 Savannah, GA(34) 50
 Q2 2016 Modesto, CA 50
 Range of a typical 40-50 bed hospital $22 $28
 Q4 2015 Franklin, TN 40
 Q4 2014
 Q4 2014
 Q4 2014
 Middletown, DE
 Newnan, GA
 Altamonte Springs, FL
 34
 50
 50
 Pre-Opening Expenses(20) (millions) Low High Q2 2013 
Q2 2013
 Littleton, CO
 Stuart, FL
 40
 34
 Operating $0.5 $1.0 Q4 2012 Ocala, FL 40
 Salaries, wages, benefits   0.4   1.0 Q4 2011 Cypress, TX 40
 $0.9  $2.0
 New IRFs: Assumptions and Timing of De Novo Hospitals
 Operational Date Location Beds
 2018 Murrieta, CA 50
 Q4 2018 Winston-Salem, NC 68
 Q2 2018 Hilton Head, SC 38
 Q2 2018 Shelby County, AL 34
 Q4 2017 Pearland, TX 40
 Q3 2017 Jackson, TN 48
 Q3 2017 Broken Arrow, OK* 40
 Q2 2017 Westerville, OH 60
 Q4 2016 Modesto, CA 50
 Q3 2016 Bryan, TX* 49
 Q3 2016 Hot Springs, AR* 40
 Q2 2016 Savannah, GA* 50
 Q4 2015 Franklin, TN 40
 Q4 2014
 Q4 2014
 Q4 2014
 Middletown, DE
 Newnan, GA
 Altamonte Springs, FL
 34
 50
 50
 * An acquisition (see page 48) that began operations in an existing hospital or unit 
  while a new hospital was/is constructed
 Refer to pages 113-116 for end notes.
 47
 Ocala (12/2012) Littleton (05/2013) Stuart (06/2013) Altamonte
 Springs (10/2014)
 Newnan (12/2014) Middletown (12/2014) Franklin (12/2015) Modesto (10/2016)
 HLS average 2016
 100%
 90%
 80%
 70%
 60%
 50%
 40%
 30%
 20%
 10%
 0%
 1 2 3 4 5 6 7 8 9 10 11 12
 Months
 IRF De Novo Occupancy and EBITDA* Trends
 Occupancy
          Sustained Positive EBITDA
 * Hospital EBITDA = earnings before interest, taxes, depreciation, and amortization
 directly attributable to the related hospital.
 occupancy
 48
 New IRFs: Assumptions for Individual Hospital Acquisitions
 Unit/Equity Acquisitions
 Location Beds DateAcquired
 Worcester, MA(15) 110 Q2 2014
 San Antonio, TX 34 Q3 2012
 Ft. Smith, AR 30 Q3 2010
 Little Rock, AR 23 Q1 2010
 Altoona, PA 18 Q4 2009
 Arlington, TX 30 Q3 2008
 IRF Acquisitions
 Location Date Acquired Beds AcquiredCensus
 One Year
 Later Census
 Broken Arrow, OK* Q3 2016 22 15 TBD
 Bryan, TX* Q3 2016 19 18 TBD
 Hot Springs, AR* Q1 2016 20 5 TBD
 Lexington, KY Q2 2015 232 140 125
 Savannah, GA* Q2 2015 50 31 33
 Johnson City, TN Q4 2014 26 6 21
 Augusta, GA Q2 2013 58 31 39
 Investment Considerations Value Added
 • IRR objective of 13% (after tax)
 • May be structured through a joint venture
 • Includes cost of CIS installation
 • TeamWorks approach to sales/marketing
 • Labor management tools and best practices
 • Clinical expertise and protocols
 • Clinical technology and programming (CIS installation)
 • Supply chain efficiencies
 • Medical leadership and clinical advisory boards
 • Partnership with Encompass (where applicable) 
* An acquisition that began operations in an existing hospital or unit while a 
  new hospital was/is constructed (see page 46)
 Refer to pages 113-116 for end notes.
 49
 • Complementary business to core home health services
 • Prioritization of Encompass home health markets    
* No Encompass hospice offering in the majority of Encompass' current
 home health locations
 • Ability to leverage existing Encompass infrastructure
 • Strong demand due to cost effectiveness of home-based care and
 implementation of bundled payments
 • Strong organic growth from existing agencies
 • Located in markets with attractive demographics
 * Encompass currently located in states that represent approx. 57% of total
 Medicare home health and hospice spend
 Organic Growth
 • Attractive partner due to quality of outcomes, data management, scale and
 market density, and willingness/ability to treat high acuity and/or chronic
 patients
 • Plan of care coordination with HealthSouth IRFs
 • Care Transition Coordinators (CTCs) serve as representatives in transitional
 care activities and strategic relationships with other healthcare providers
 • Highly fragmented market
 • Prioritization of HealthSouth IRF markets
 • Proven ability to consummate and integrate acquisitions
 • Sustainable and replicable culture
 • Implementation of Encompass' best practices and technology
 Home Health
 Acquisitions
 Hospice
 Acquisitions
 Clinical
 Collaboration 
Multi-faceted Home Health & Hospice Growth Strategy
 50
 13,000
 12,000
 11,000
 10,000
 9,000
 8,000
 7,000
 6,000
 5,000
 4,000
 #
 of
 Ag
 en
 ci
 es
 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
 Home Health Growth Pipeline 
 $18.1 billion Medicare home
 health market is highly
 fragmented with over 12,300
 home health agencies.
  Approx. 93% of these have
 annual revenue of less than
 $5 million.
  Top 5 public companies
 represent approx. 19% of the
 Medicare market.
  Encompass represents 2.6%
 of the Medicare home health
 market.
 Prioritize acquisitions in 
HLS IRF markets to enhance
 clinical collaboration
 Number of Home Health Agencies Over Time
 Cost-
 Based
 Interim
 Payment
 Systems
 (IPS)
 Prospective Payment System (PPS)
 The number of home health agencies
 is near an all-time high and presents
 significant consolidation opportunities.
 Source: MedPAC December 2016 Public Meeting presentation; MedPAC - Report to Congress: Medicare Payment Policy -
 March 2016, page 214, March 2015, page 218, March 2014, page 221, March 2013, page 194, and March 2003, page
 112; MedPAC - Healthcare spending and the Medicare program, June 2006, page 131; Health Market Science
 51
 Freestanding
 Hospital/SNF
 based
 Home Health
 based
 4,000
 3,000
 2,000
 1,000
 0
 2000 2007 2011 2012 2013 2014
 1,069
 2,103 2,491
 2,643 2,844 3,027807
 704
 608 591
 578 559
 378
 443
 486 492
 503 506
 Hospice Growth Pipeline
  In 2015, Medicare hospice spending totaled approx.
 $16 billion.
  1.4 million Medicare beneficiaries received hospice
 services from approx. 4,200 providers in 2015.
  Between 2000 and 2012, Medicare spending for hospice
 increased more than 400%, driven by greater numbers of
 beneficiaries electing hospice.
  Between 2012 and 2014, Medicare spending has been flat
 despite the growth in the number of beneficiaries receiving
 hospice care. Flat spending is mostly explained by the 2%
 payment reduction from the sequester.
  Occurring simultaneously since 2000 has been a
 substantial increase in the number of for-profit providers.
 Acquisition Strategy for
 Hospice
  Build out markets with
 existing home health
 presence
  Medicare focus
  Home-based service
 offering
  Strong clinical practice
 and clean compliance
 record
  Highly regarded market
 reputation
  Attractive geography
 and demographics
  Quality people that will
 succeed in Encompass
  Ability to leverage
 existing infrastructure to
 drive margin
 Hospice Providers over Time
 Source: MedPAC December 2016 Public Meeting presentation; MedPAC, Medicare
 Payment Policy, March 2016, pages 299, 301, and 306.
 52
 Summary: Multiple Avenues Available for Sustained Growth
  in Both Segments
 • The Company continues to have excellent
 organic growth opportunities in inpatient
 rehabilitation, home health, and hospice.
     —  Track record of consistent market share gains
 —  IRF organic growth supplemented by bed
 additions
 —  Maturation of acquired agencies for Encompass
 • Target four to six new IRFs per year to
 complement organic growth
     —  De novos and IRF acquisitions will allow entry
 into, and growth in, new markets.
     —  Proven track record of success
 • Target $50 to $100 million per year toward home
 health and hospice acquisitions to complement
 organic growth
 —  Home health acquisitions and new-store growth
 prioritized in HealthSouth IRF markets
 —  Hospice acquisitions and new-store growth
 prioritized in Encompass home health markets 
As the 1946-1965 baby boom
 generation reaches 65, the growth in
 the number of beneficiaries increases
 from 2% to about 3%.
 Source: Centers for Medicare & Medicaid Services, Medicare Trustee's Report - June 2016 - page 191 
The IRF, home health, and
 hospice patient populations are
 experiencing favorable long-term
 demographic trends.
 53
 Alternative Payment Models
 54
 Accountable Care Organizations (ACOs)
 Pioneer ACOs
 (2016 – 9 ACOs / ~275,000 Medicare beneficiaries)
 • 32 Pioneer ACOs launched since program’s inception; 9 remained in the program prior to the model concluding on
 December 31, 2016 (some had voluntarily transferred to the Next Generation ACO program - see below).
 • Only half of the participants or less earned shared savings in 2012, 2013, 2014, and 2015. 
• Shared savings CMS paid to Pioneer ACOs totaled $77 million in 2012, $68 million in 2013, $82 million in 2014, and $34
 million in 2015 (an average of $5.7 million per ACO).
 • Estimates suggest ACO start-up and annual administrative costs significantly reduce or exceed the shared savings
 generated from ACOs.
 Medicare Shared Savings Program (MSSP)   
(480 ACOs / 9.0 million Medicare beneficiaries)
 • Year 3 performance for 392 MSSP ACOs:
 ◦ 119 ACOs (30%) held spending below their benchmark.
 ◦ 83 ACOs (21%) reduced health costs compared to their benchmark, but did not meet the minimum savings threshold
 for shared savings.
 ◦ 190 ACOs (49%) did not reduce costs compared to their benchmark.
 ◦ Shared Savings Program ACOs generated total program savings of $429 million. 
Source: CMS/HHS press releases; Government Accountability Office (GAO) Report to the House Ways and Means – 
              April 2015; AHA/McManis report - April 2011
 Encompass serves as Premier ACO's (~22,000 covered lives in north Texas and 
southern Oklahoma) exclusive preferred home health provider.
  Receives increased referrals for Medicare home health patients from the ACO
  Eligible to receive a portion of the ACO's shared savings
  Total shared savings achieved by ACO in 2015 was $5.8 million.
 - Ranked 8th out of all MSSP ACOs that started on or after January 1, 2014.
 - Did not meet minimum savings rate for Encompass to qualify for shared savings
 As of 
January 2017,
 there were 
562
 Medicare ACOs
 serving 
12.3 million
 Medicare 
and/or Medicaid
 beneficiaries.
 Performance
 results so far
 have been
 mixed. Medicare ACO Track 1+ Model – will start in 2018
 • Will test a payment design that incorporates more limited downside risk than Tracks 2 or 3 of the Shared Savings Program
 Next Generation ACOs
 • Initiative for ACOs that are experienced in coordinating care for populations of patients; 45 ACO participants
 • Allows providers to assume higher levels of financial risk and reward than are available under Pioneer ACOs and MSSP
 55
 Bundled Payments
 How the Retrospective Models Work
  The BPCI “convener” is responsible for bringing
 providers together to provide a continuum of services
 throughout an episode of care. The BPCI "awardee" is
 the entity that bears the financial risk and receives the
 shared savings from CMS.
  Each participating provider in the care sequence
 continues to receive its traditional reimbursement from
 Medicare.
  The sum of all payments made to each provider for
 selected DRGs is then retroactively reconciled to a
 target payment determined by CMS. Payment
 reconciliations are performed quarterly, typically with a
 9- to 12-month lag.
  Payment reconciliations: If actual spending exceeds
 the target, the awardee is responsible for paying a
 portion of the difference to CMS. If actual spending is
 less than the target, the awardee keeps a portion of
 the savings.
  The convener can choose to partner with other
 providers in shared savings agreements and allocate
 the savings, or “rebates,” across the providers who
 participated in providing the continuum of care.
  Shared savings agreements must be reviewed and
 approved by the Center for Medicare and Medicaid
 Innovation.
 Model  1
 All acute patients (all DRGs)
 – Concluded December 31, 2016 –
 The Bundled Payments for Care Improvement
 (BPCI) initiative currently tests
 four types of bundles
 (i.e. "Models"):
 Models 2 & 3 have the most impact on post-acute providers.
 Model  2
 Hospital plus post-acute period (selected DRGs)
 Model  3
 Post acute only (selected DRGs)
 Model  4
 Hospital plus readmissions
 (selected DRGs)
 Notes: Models 1, 2, and 3 are retrospective models; model 4 is a prospective model.
             The convener and awardee can be, but may not be, the same entity.
 56
 BPCI Model 2, CJR, and EPM Opportunities
 HLS Referral Source Bundle Type % of HLS MedicareDischarges % of Total HLS Discharges
 115 acute care hospitals
 participating in Model 2 / Phase 2
 in 80 HLS IRF markets(21)
 Bundles selected for Model 2
 participation are chosen from a
 list of 48 BPCI-eligible bundles. 2.8% 2.0%
 Approx. 850 acute care hospitals
  in 67 geographic areas included in
 the Comprehensive Care for Joint
 Replacement Model ("CJR") and
 Episode Payment Model ("EPM")
 Lower extremity joint
 replacement ("LEJR") and
 surgical hip and femur fracture
 treatment ("SHFFT")
 3.3% 2.3%
 Approx. 1,100 acute care 
hospitals in 98 geographic areas
 included in Cardiac EPM
 Acute myocardial infarction
 ("AMI") and coronary artery
 bypass graft ("CABG") model
 0.7% 0.5%
 Bundling Participation and Opportunities - Inpatient Rehabilitation 
HealthSouth IRF Participation in BPCI Model 3
 BPCI Bundle /
 Number of IRFs Bundle Length
 % of HLS Medicare
 Discharges % of Total HLS Discharges
 Stroke (3 IRFs) 60 days 0.22% 0.16%
 Simple Pneumonia (1 IRF) 60 days 0.01% 0.01%
 Sepsis (1 IRF) 60 days 0.03% 0.02%
 Double-lower extremity joint
 replacement (2 IRFs) 60 days 0.03% 0.02%
 Upper extremity joint replacement
 (1 IRF) 60 days 0.0% 0.0%
 Data on this page is based on 2015 discharges.
 Refer to pages 113-116 for end notes.
 30 to 40% of these patients have complicating comorbidities
 ~35% of these discharges are LEJR episodes and ~40% of these
 LEJR patients have complicating comorbidities
 HealthSouth has 36 IRFs located in CJR markets; 20 overlap with Encompass
 40 to 50% of these patients have complicating comorbidities HealthSouth has 40 IRFs located in cardiac markets; 26 overlap with Encompass
 57
 Bundling Participation - Home Health and Hospice
 Encompass made the strategic decision to participate in BPCI Model 3 in select
 markets and episodes (below). In addition, Encompass is participating in other
 alternative payment models such as BPCI Model 2, CJR, and EPMs.
 52 Encompass providers have selected the
 following bundle types for participation in
 Model 3.
 Number of BPCI
 Bundles Selected
 Encompass 
Home Health
 Bundled Episodes 
in 2015
 % of Total
 Encompass
 Episodes 
in 2015
 Major joint replacement of the lower extremity 13 643 0.47%
 Simple pneumonia and respiratory infections 8 171 0.12%
 Congestive heart failure 5 129 0.09%
 Spinal fusion (non-cervical) 4 93 0.07%
 Sepsis 5 84 0.06%
 Revision of the hip or knee 6 80 0.06%
 Chronic obstructive pulmonary disease 4 62 0.05%
 Urinary tract infection 3 57 0.04%
 Major joint replacement of the upper extremity 4 54 0.04%
 Other respiratory 8 45 0.03%
 All Other Episode Types 40 226 0.17%
 Total 100 1,644 1.20%
 Note: Data on this page is based on 2015 Encompass episodes.
 58
 Alternative Payment Models: Comprehensive Care for Joint Replacement Model
 and Episode Payment Model – Surgical Hip/Femur Fracture Treatment
 * These comorbidities are specific to acute care hospitals and are defined differently than IRFs' comorbidities.
 Source:  https://innovation.cms.gov/initiatives/cjr
 The Comprehensive Care for Joint Replacement Model (“CJR”) and Episode Payment Model - Surgical Hip/Femur
 Fracture Treatment (“SHFFT”) are payment models for episodes of care related to knee and hip replacements and
 fractures under Medicare.  The CJR model is a five-year model that began April 1, 2016 in 67 geographic areas.
 The SHFFT model is a five year model that will begin July 1, 2017 in the same geographic areas.
 Acute care hospital patients are categorized by Medicare Severity Diagnosis Related Groups (“MS-DRGs”);
 the CJR model covers two MS-DRGs (469, 470) and the SHFFT model covers three MS-DRGs (480, 481, 482):
 MS-DRG 469 Major joint replacement or reattachment of lower extremity with major complications or comorbidities*
 MS-DRG 470 Major joint replacement or reattachment of lower extremity without major complications or comorbidities*
 MS-DRG 480 Hip and femur procedures except major joint with major complications or comorbidities*
 MS-DRG 481 Hip and femur procedures except major joint with complications or comorbidities*
 MS-DRG 482 Hip and femur procedures except major joint without complications or comorbidities*
 IRF patients are categorized by Rehabilitation Impairment Categories (“RICs”);
 CJR model patients are a subset of two RICs:
 RIC 07 Lower extremity fractures (~77% are MS-DRGs 469, 470, 480, 481 and 482)
 RIC 08 Lower extremity joint replacements (~76% are MS-DRGs 469, 470, 480, 481 and 482)
 Since the implementation of the 60% Rule in 2007, the relative number of 
RIC 07 and RIC 08 patients treated in HealthSouth IRFs has declined significantly.
 RIC
 % of HealthSouth Medicare Discharges
 2005 2007 2009 2011 2013 2015 2016
 Total RIC 07 (Fractures) 13.1% 14.8% 13.6% 11.6% 10.2% 9.8% 6.5%
 Total RIC 08 (Replacements) 17.9% 11.8% 9.0% 7.6% 6.7% 5.5% 3.2%
 59
                   
If episode spending <
 target price, acute care
 hospital receives
 additional payment
 from Medicare.
 If episode spending >
 target price, acute care
 hospital returns a
 portion of the Medicare
 episode payment.
 CJR and SHFFT Models - How Do They Work?
       
              POST-ACUTE CARE    
                        PROVIDERS
 Acute care hospitals are accountable for 
expenditures and quality of care for entire "episode."
 Episode = hospitalization + 90 days post discharge
 Begins with an
 admission to an
 acute care
 hospital for a
 patient who is
 ultimately
 discharged
 under MS-DRG
 469, 470, 480,
 481, and 482.
 Acute care hospitals receive separate episode target prices each year reflecting the differences in spending for each MS-DRG.
 Target prices:
 ü are based on three years of historical data;
 ü include mandatory percentage discounts of up to 3% vs. benchmark episode spending; and
 ü incorporate a blend of historical, hospital-specific spending and regional spending for episodes, with the regional component
 of the blend increasing over time.
 Years 1 and 2 =
 2/3 hospital-specific; 1/3 regional
 Year 3 =
 1/3 hospital-specific; 2/3 regional 
Years 4 and 5 =
 100% regional
 RETROSPECTIVE
 RECONCILIATION
 PERFORMED BY CMS
 At the end of each
 performance year,
 actual spending for
 each episode is
 compared to each
 acute care hospital's
 target price.
 There is no downside risk in year one. Repayment
 responsibility will be phased in during year two.
 All providers are paid under the usual Medicare payment system rules and procedures. 
Patients are
 discharged to a
 post-acute care
 provider or to
 home self-care. 
Source:  CMS
 60
 CJR Model - How Does It Work? - Collaborators*
 Reconciliation Payment Limit Repayment Limit
 Payment Limits for CJR Acute Care Hospitals
 20
 10
 0
 -10
 -20%
 of
 Q
 ua
 lit
 y-
 Ad
 ju
 st
 ed
 Ta
 rg
 et
 Pr
 ic
 e
 2016 2017 2018 2019 2020
 Year of Implementation
 5% 5%
 10%
 20% 20%
 (5)%
 (10)%
 (20)% (20)%
 Risk Sharing is Allowed in CJR with “Collaborators”
 Acute care hospitals participating in CJR may choose to engage in risk-sharing financial arrangements
 with other care providers for CJR episodes. A provider participating in these risk-sharing arrangements
 with a CJR acute care hospital is deemed a "collaborator."
 There are fourteen types of providers (plus
 ACOs) eligible to be CJR Collaborators,
 including IRFs and home health agencies.
 CJR acute care hospitals must establish
 eligibility criteria for Collaborators to meet,
 including quality of care criteria.
 Gain sharing payments must be determined in
 accordance with a methodology that is
 substantially based on quality of care and the
 provision of CJR activities.
 Non-ACO collaborators may not individually
 make alignment payments greater than 25% of
 the CJR acute care hospital’s repayment
 amount.  Each CJR acute care hospital must
 remain responsible for at least 50% of its
 repayment amount and may not collect
 alignment payments from collaborators in excess
 of 50% of the hospital’s repayment amount.
 There is no ceiling on the portion of the
 reconciliation payments received by a hospital
 from Medicare that the hospital may distribute to
 non-physician Collaborators.
 Source:  DHG Healthcare and CMS
 * The SHFFT model also provides for similar risk-sharing arrangements.
 The corridors for payment limits phase-in over time.
 61
 CJR and SHFFT Models - What's the Potential Impact to
 HealthSouth?
 Participation by acute care hospitals subject to limitation, notably if the hospital is participating in certain other
 alternative payment programs, such certain models of the Bundled Payment for Care Improvement (BPCI) initiative
 * Complicating comorbidities include conditions such as diabetes, morbid obesity, and congestive heart failure.
 ~30% of HealthSouth's fractures
 and ~40% of HealthSouth's
 replacements have complicating
 comorbidities* that require the
 intensity of care delivered in an IRF.
 HealthSouth CJR
 and SHFFT MS-DRG
 Discharges in
 Applicable Markets
 Fractures
 ~1,980 discharges
 Replacements
 ~1,080 discharges
 Σ = ~3,060
 Discharges,
 or ~3.3% of Total
 HLS Medicare
 Discharges
 (~2.3% of Total HLS
 Discharges)
 90-Day Episode Spend
 Fractures
 HLS cost ≤ SNF cost HLS cost > SNF cost
 ~1,370 discharges ~610 discharges
 Replacements
 HLS cost ≤ SNF cost HLS cost > SNF cost
 ~130 discharges ~950 discharges
 Fractures
 (average revenue
 per discharge of
 ~$19,300)
 Replacements
 (average revenue
 per discharge of
 ~$14,400)
 Total CJR and SHFFT
 MS-DRG discharges
 in applicable markets
 ~1,980 ~1,080
 CJR and SHFFT MS-
 DRG discharges with
 HLS cost ≤ SNF cost
 (~1,370) (~130)
 Discharges with
 complicating
 comorbidities
 (~180) (~380)
 Residual CJR and
 SHFFT MS-DRG
 discharges
 ~430 ~570
 Source: 2015 Medicare claims data
 62
 CJR and SHFFT Models - HealthSouth's Strategies
 Opportunities Outweigh the Risks
 Increase the
 number of CJR and
 SHFFT discharges
 in all markets
 where HealthSouth
 has a cost
 advantage
 ü
 Present the
 empirical data to
 referral sources
 ü
 Further improve
 advantage by
 reducing acute
 care transfers and
 discharges to
 SNFs through
 tools such as
 predictive
 modeling
 Increase the number
 of stroke discharges
 in all markets
 ü
 New guidelines for
 adult stroke
 rehabilitation and
 recovery favoring
 IRFs over SNFs
 released by the
 American Heart
 Association and the
 American Stroke
 Association (pg 20)
 a
 ü
 99 of HealthSouth's
 IRFs hold The Joint
 Commission's
 Disease-Specific
 Care Certification in
 Stroke
 Rehabilitation.
 Average revenue per
 discharge of ~$22,700
 Improve value
 proposition for CJR/
 SHFFT discharges in
 markets in which
 HealthSouth does not
 currently have a cost
 advantage
 ü
 Import best practices
 from other HealthSouth
 IRFs
 ü
 Reduce acute-care
 transfers and
 discharges to SNFs
 through tools such as
 predictive modeling
 ü
 Increase clinical
 collaboration between
 HealthSouth's IRFs and
 Encompass
 Serve as a
 collaborator
 ü
 Enhance value
 proposition to
 CJR/SHFFT
 acute care
 hospitals by
 engaging in risk-
 sharing financial
 arrangements
  Individually
 negotiated with
 each acute
 care hospital
 based on
 circumstances
 in each market
  Risk capped at
 25% of acute
 care hospital's
 repayment
 amount
 Incremental, 
Non-CJR/SHFFT
 Growth Opportunities
 Increase the
 number of
 Encompass
 home health
 CJR/SHFFT
 episodes
 ü
 Lower length
 of stay or
 bypass SNFs
 and go directly
 to Encompass
 home health
 ü
 Increase
 clinical
 collaboration
 efforts
 between
 HealthSouth's
 IRFs and
 Encompass
 Average revenue
 per episode of
 ~$3,300
 63
 Medicare-certified home health agencies
 that provide services in the following states
 will be required to participate in the model:
 1. Arizona 4
 2. Florida 17
 3. Iowa —
 4. Maryland 1
 5. Massachusetts 2
 6. Nebraska —
 7. North Carolina 6
 8. Tennessee 5
 9. Washington —
 Encompass Agencies 35
 In the calendar year 2016 HH-PPS final rule,
 CMS finalized a Home Health Value-Based
 Purchasing (HHVBP) Model that covers five
 performance years beginning January 1, 2016
 and concluding on December 31, 2022.
 Home Health Value-Based Purchasing Model
 Based on its industry-leading quality and patient satisfaction scores, 
Encompass is positioned to benefit from its payments being directly connected 
to its performance versus its peers via value-based payments (see page 19).
 • Three process measures from existing Outcome and
 Assessment Information Set (OASIS) data collection
 • Seven outcome measures from existing OASIS data
 collection and two outcome measures from claims
 data
 • Five HHCAHPS** consumer satisfaction measures
 • Three New Measures:
 ◦ points are achieved for merely reporting data
 ◦ will be submitted through the HHVBP Portal
 Total Performance Scores (a numeric score ranging
 from 0 to 100 based on each agency's performance) will
 be calculated from the following set of measures*:
 Performance Years Calendar Year forPayment Adjustment
 Maximum Payment
 Adjustment (-/+)
 2016 2018 3%
 2017 2019 5%
 2018 2020 6%
 2019 2021 7%
 2020 2022 8%
 Source:  https://innovation.cms.gov/initiatives/home-health-value-based-purchasing-model
 * Per the CY 2017 HH Final Rule at: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-26290.pdf
 ** Home Health Care Consumer Assessment of Healthcare Providers and Systems
      
 – Approximately 19% of Encompass' Medicare revenue –
 1st Adjustment
 64
 Capital Structure
 65
 Debt Maturity Profile - Face Value
 * This chart does not include ~$279 million of capital lease obligations or ~$56 million of other notes payable.
 See the debt schedule on page 67.
 2016 2019 2020 2020 2021 2022 2023 2024 2025 2043
 $350 Senior
 Notes 5.75%
 $1,200
 Senior
 Notes
 5.75%
 $320 Conv.
 Sr. Sub.
 Notes 2.0%
 $300 Senior
 Notes
 5.125%
 $152
 Drawn +
 $33
 reserved
 for LC’s 
Holders have a put
 option in 2020
 As of December 31, 2016*
 ($ in millions)
 $415
 Available
 Callable beginning
 November 2017
 HealthSouth is positioned with a cost-efficient, flexible capital structure.
 Callable beginning March 2018
 Revolver
 Revolver
 Capacity $421
 Term
 Loans
 Callable beginning
 September 2020
 No significant debt
 maturities prior to 2020
 66
 S&P Moody's
 Corporate Rating BB- Ba3
 Outlook Stable Stable
 Revolver Rating BB+ Baa3
 Senior Notes Rating B+ B1
    Financial Leverage and Liquidity
 (1)  
Liquidity
 Credit Ratings 
2012 2013 2014 2015 2016
 $1.25
 $1.52
 $2.11
 $3.17
 $3.02
 (billions)
 Leverage Ratio(22)
 Total Debt
 3.8x
 December 31,
 2016
 December 31,
 2015
 Cash Available $ 40.5 $ 61.6
 Revolver $ 600.0 $ 600.0
 Less:
 - Draws (152.0) (130.0)
 - Letters of Credit (33.3) (34.2)
 Available $ 414.7 $ 435.8
 Total Liquidity $ 455.2 $ 497.4
 Reconciliations to GAAP provided on pages 98-112.
 Refer to pages 113-116 for end notes. See also the debt schedule on page 67.
 2.5x
 67
 Debt Schedule
 Reconciliations to GAAP provided on pages 98-112.
 Change in
 Dec. 31, Dec. 31,  Debt vs.
 ($millions) 2016 2015  YE 2015
 Advances under $600 million revolving credit facility,
     July 2020 - LIBOR +200bps $ 152.0 $ 130.0 $ 22.0
 Term loan facility, July 2020 - LIBOR +200bps 421.2 443.3 (22.1)
 Bonds Payable:
 7.75% Senior Notes due 2022 — 174.3 (174.3)
 5.125% Senior Notes due 2023 295.3 294.6 0.7
 5.75% Senior Notes due 2024 1,193.2 1,192.6 0.6
 5.75% Senior Notes due 2025 343.9 343.4 0.5
 2.0% Convertible Senior Subordinated Notes due 2043 275.7 265.9 9.8
 Other notes payable 55.8 39.2 16.6
 Capital lease obligations 279.3 288.2 (8.9)
 Long-term debt $ 3,016.4 $ 3,171.5 $ (155.1)
 Debt to Adjusted EBITDA(1) 3.8x 4.6x
 68
 2.0% Convertible Senior Subordinated Notes Due 2043
 Background
 • In November 2013, the Company issued $320 million of 2.0% Convertible Senior Subordinated Notes
 due 2043 in exchange for 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock.
 • The Company viewed the Convertible Perpetual Preferred Stock as having a high cost of capital with
 limited alternatives for redemption.
 • Investors were willing to trade the 6.5% dividend on the Convertible Perpetual Preferred Stock for the
 2.0% coupon on the Convertible Senior Subordinated Notes in large part due to the liquidity offered via
 the investor put option (a protection against downside credit risk).
 Terms
 • Issued - $320 million (recorded as approx. $249 million of debt and $71 million of equity)
 • Coupon - 2.0%
 • Underlying shares - approx. 8.5 million common shares (8.3 million included in 2015 weighted average
 diluted share count)
 • Current conversion price - $37.16
 • Current conversion rate - 26.9106
 • Convertible, by the holder, at any time into shares of the Company's common stock
 ü At the Company's option, settlement can be made in cash, shares, or any combination thereof.
 Options
 Holders'
 Option
 • Put option effective December 1, 2020 at 100% of principal amount, plus accrued
 and unpaid interest which must be settled in cash
 Company's
 Option
 • Right to redeem, prior to December 2018, at 100% of the principal amount (plus a
 make-whole premium) if volume weighted average price of Company's common
 stock is at least 120% (currently $44.59) of the conversion price of the convertible
 notes for at least 20 trading days during any 30 consecutive trading day period
 • Holders may elect to convert their notes in lieu of redemption and receive any make-
 whole premium due
 • After December 2018, fully redeemable, at par, for cash
 69
 38 Lease Building and Land
 A  CON (Certificate of Need) is a regulatory requirement in
 some states and federal jurisdictions that require state
 authorization prior to proposed acquisitions, expansions, or
 construction of new hospitals. 
58 Own Building and Land
 27 Own Building Only*
 IRF Real Estate Portfolio
 123 Inpatient Rehabilitation Hospitals: 8,504 Licensed Beds
 4,340 Licensed Beds
 in CON States
 4,164 Licensed Beds
 in Non-CON States
 1 of the 123 HealthSouth hospitals is nonconsolidated. For that
 hospital, the Company owns the building only. The Company's
 licensed bed count does not include the 51 beds associated
 with the nonconsolidated hospital.
 As of December 31, 2016
 * The joint venture with St. John Health System in Broken Arrow, OK is operating under a short-term lease until a 
   new hospital is completed in 2017. The new hospital will be owned by the respective joint venture and is included 
   in the "Own Building Only" category.
 70
 Information Technology
 71
 IRF Clinical Information System (“CIS”): Improved
 Patient Safety and Streamlined Operational Efficiencies 
Pre-Admission Assessment 
& Approval
 Discharge Planning 
and Patient Education
 •Patient History
 •Problems and Diagnoses 
•Orders and Results
 •Plan of Care
 •Workflow Alerts and Reminders
 •Treatment and Interventions 
Document
 Imaging
 Charge and 
Registration Services
 •Registration
 •Census
 •Coding 
•Billing
 Quality Reporting
 •Uniform Data Systems
 •Clinical Data Warehouse
 •Clinical Intelligence 
Referral Hospitals
 Ancillary Services
 Clinical Notes
 • Physician
 • Nursing
 • Therapy
 • Care Mgmt.
 Integrated and 
Bar-coded Point of Care
 Medication Administration
 Treatment Plan
 • Computerized 
Physician Order 
Entry (CPOE)
 • Clinical Decision 
Support  (CDS)
 Coordinate Care 
and Engage Patients
 72
 IRF Proprietary Management System: Beacon
 73
 Home Health Information System: Homecare Homebase
 Clinical
  HCHB manages the entire patient
 workflow and provides field clinicians
 with access to patient records,
 diagnostic information, and notes from
 prior visits via a mobile application.
  Real-time, customized feedback and
 instructions provided on-site
  Enhances patient data capture and
 database management which aids in
 the development of algorithms that 
can improve the plan of care
 Sales
  Provides real-time market
 intelligence to sales area managers,
 allowing them to quickly identify the
 most valuable referral sources
  Specialty programs integrate
 individual physician protocols into
 HCHB.
 – Creates loyalty and incentives for
 physicians and facilities,
 generating additional future
 referrals
  Web-based portal allows referring
 physicians to easily monitor the care
 and progress of patients and to sign
 orders electronically
 Compliance
  Field clinicians are required to adhere
 to clinical protocols and physician
 orders, ensuring that proper regulatory
 and compliance procedures are
 followed.
  Internal branch-level audits completed
 three times a year
 – HCHB-generated outputs reviewed
 by management to identify any
 branches requiring additional
 oversight
  Compliance program also involves
 extensive internal training
 Management and Operations
  Best-in-class data management and
 reporting ensures managers have
 access to relevant data needed to make
 correct decisions.
  Rules-based algorithms ensure
 accountability by escalating tasks and
 notifying management when processes
 are delayed.
  Seamless billing with processes in
 place to ensure claim completeness
 Homecare Homebase
 (“HCHB”) was born
 out of the Encompass
 operating model;
 HCHB is a leading IT
 platform provider in
 the home health and
 hospice industry.
 Full utilization of
 capabilities in leading-
 edge technology
 embedded in culture,
 driving superior
 clinical, operational
 and financial
 outcomes.
 74
 Operational Metrics
 75
 Salaries and Benefits Hospital-Related Expenses Provision for Doubtful Accounts
 48.6
 20.8
 1.2
 47.9
 20.7
 1.1
 48.3
 20.7
 1.3
 49.4
 20.9
 1.7
 49.4
 20.6
 1.9
 • Salaries and Benefits includes group medical costs and is impacted by
 staffing levels based on patient volumes.
 ◦ Salaries and Benefits in 2016 were impacted by staffing changes at former
 Reliant hospitals.
 • Hospital-related Expenses includes other operating expenses (excluding
 loss on disposal or impairment of assets), supplies, and occupancy costs.
 • Provision for Doubtful Accounts is impacted by reserve activity related to
 the level of pre-payment denials by Medicare Administrative Contractors.
 (see page 76)
 • Employees per Occupied Bed (“EPOB”) is calculated by dividing the
 number of full-time equivalents, including an estimate of full-time
 equivalents from the utilization of contract labor, by the number of occupied
 beds during each period. The number of occupied beds is determined by
 multiplying the number of licensed beds by the Company’s occupancy
 percentage.
      2012         2013         2014        2015       2016         2012        2013         2014        2015         2016 2012        2013        2014        2015        2016 
 
IRF Operational Metrics: Expense Efficiencies 
3.43 3.44 3.40 3.41 3.44
 EPOB
 (Percent of Net Operating Revenues)
 76
 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment
 Impact to Balance Sheet
 Dec. 30,
 2016
 Dec. 31,
 2015
 Dec. 31,
 2014
 (In Millions)
 Pre-payment claims denials $ 159.7 $ 114.8 $ 59.3
 Recorded reserves (47.9) (31.2) (22.8)
 Net accounts receivable
 from pre-payment claims
 denials $ 111.8 $ 83.6 $ 36.5
 Background
  For several years, under programs designated as “widespread
 probes,” certain Medicare Administrative Contractors (“MACs”)
 have conducted pre-payment claim reviews and denied
 payment for certain diagnosis codes.
 – Pre-payment claim denials increased for IRFs during 2014
 and 2015 due to a widespread review of neurological billing
 codes and expansion of ongoing lower extremity code
 denials.
  HealthSouth appeals most denials. On claims it takes to an
 administrative law judge (“ALJ”), HealthSouth historically has
 experienced an approximate 70% success rate.
 – MACs identify medical documentation issues as a leading
 basis for denials.
 – HealthSouth's investment in clinical information systems and
 its medical services department has further improved its
 documentation and reduced technical denials.
 – However, MACs and other HHS contractors continue to
 issue denials without regulatory basis.
  By statute, ALJ decisions are due within 90 days of a request
 for hearing, but appeals are taking years. HHS has proposed
 rule changes to address the backlog of appeals, but their effect
 is uncertain.
  A federal court recently ordered HHS to eliminate the backlog
 by the end of calendar year 2020. HHS has appealed the order.
  All Medicare providers continue to experience delays. The
 backlog is growing because the ALJs receive one year's worth
 of appeals every four to six weeks, according to HHS.
 – Currently, ALJs are hearing HealthSouth appeals from
 claims denied up to five years ago.
 Impact to Income Statement
 Period New Denials
 Collections of
 Previously
 Denied
 Claims
 Bad Debt
 Expense for
 New Denials
 Update of
 Reserve
 for Prior
 Denials
 (In Millions)
 Q4 2016 $17.8 $(4.4) $5.4 $0.5
 Q3 2016 15.7 (8.5) 4.6 —
 Q2 2016 18.7 (4.9) 4.6 —
 Q1 2016 22.7 (8.4) 6.0 —
 Q4 2015 22.5 (4.1) 5.6 (1.3)
 Q3 2015 22.0 (4.1) 5.9 (1.1)
 Q2 2015 18.2 (3.8) 4.9 —
 Q1 2015 16.3 (3.0) 4.2 —
 Q4 2014 22.0 (6.6) 6.2 (3.2)
 Q3 2014 15.8 (0.5) 1.7 —
 Q2 2014 7.1 (1.7) 3.0 —
 HealthSouth reserves for pre-payment claim denials via the provision for
 doubtful accounts upon notice from a MAC that a claim is under review.
 77
 Inpatient Rehabilitation Operational and Labor Metrics
 * The decrease in licensed beds from Q1 2016 to Q2 2016 was due to the sale of the hospital in Beaumont, TX (61 beds).
 Refer to pages 113-116 for end notes.
 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year
 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015
 (In Millions)
 Net patient revenue-
 inpatient $ 740.9 $ 724.1 $ 721.2 $ 719.4 $ 696.8 $ 625.1 $ 618.7 $ 606.6 $ 2,905.5 $ 2,547.2
 Net patient revenue-
 outpatient and other 26.7 27.6 31.4 29.8 29.1 26.5 26.6 23.7 115.6 105.9
 Net operating revenues $ 767.6 $ 751.7 $ 752.6 $ 749.2 $ 725.9 $ 651.6 $ 645.3 $ 630.3 $ 3,021.1 $ 2,653.1
 (Actual Amounts)
 Discharges(23) 41,474 41,368 41,365 41,098 40,891 36,746 36,408 35,116 165,305 149,161
 Net patient revenue per
 discharge $ 17,864 $ 17,504 $ 17,435 $ 17,505 $ 17,040 $ 17,011 $ 16,994 $ 17,274 $ 17,577 $ 17,077
 Outpatient visits 154,311 158,981 164,761 162,649 163,119 138,121 144,914 131,353 640,702 577,507
 Average length of stay 12.8 12.7 12.6 12.9 12.6 12.9 13.0 13.3 12.8 12.9
 Occupancy % 67.8% 67.8% 68.2% 68.9% 66.4% 69.6% 70.4% 72.8% 67.8% 62.8%
 # of licensed beds* 8,504 8,441 8,430 8,481 8,404 7,422 7,374 7,100 8,504 8,404
 Occupied beds 5,766 5,723 5,749 5,843 5,580 5,166 5,191 5,169 5,766 5,278
 Full-time equivalents
 (FTEs)(24) 19,930 19,663 19,503 19,352 19,136 17,782 17,601 17,002 19,612 17,880
 Contract labor 245 241 205 194 152 141 118 116 221 132
 Total FTE and contract
 labor 20,175 19,904 19,708 19,546 19,288 17,923 17,719 17,118 19,833 18,012
 EPOB(25) 3.50 3.48 3.43 3.35 3.46 3.47 3.41 3.31 3.44 3.41
 78
 Home Health and Hospice Operational Metrics
 Refer to pages 113-116 for end notes.
 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year
 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015
 (In Millions)
 Net home health revenue $ 165.2 $ 162.0 $ 157.1 $ 150.9 $ 144.4 $ 118.3 $ 111.5 $ 103.9 $ 635.2 $ 478.1
 Net hospice and other revenue 17.1 13.1 11.0 9.7 9.0 8.7 7.6 6.4 50.9 31.7
 Net operating revenues $ 182.3 $ 175.1 $ 168.1 $ 160.6 $ 153.4 $ 127.0 $ 119.1 $ 110.3 $ 686.1 $ 509.8
 Home Health: (Actual Amounts)
 Admissions(26) 27,957 27,239 25,753 25,763 22,892 18,076 16,862 16,499 106,712 74,329
 Recertifications 21,422 20,888 20,432 19,453 18,909 16,542 15,103 14,485 82,195 65,039
 Episodes 49,253 46,866 45,774 43,844 42,697 33,542 31,817 29,512 185,737 137,568
 Average revenue per episode $ 3,023 $ 3,032 $ 3,033 $ 3,035 $ 3,005 $ 3,123 $ 3,082 $ 3,102 $ 3,031 $ 3,072
 Episodic visits per episode 18.4 19.0 18.9 19.1 18.2 19.6 19.4 19.6 18.8 19.1
 Total visits 1,033,502 1,001,021 967,968 937,804 862,224 721,055 675,095 630,999 3,940,295 2,889,373
 Cost per visit $ 76 $ 75 $ 73 $ 73 $ 73 $ 72 $ 71 $ 71 $ 74 $ 72
 Hospice:
 Admissions(27) 996 832 785 724 614 620 594 624 3,337 2,452
 Patient days 104,183 83,628 71,277 63,431 59,100 55,627 49,272 40,898 322,519 204,898
 Revenue per day $ 164 $ 157 $ 154 $ 153 $ 155 $ 156 $ 154 $ 156 $ 158 $ 155
 79
 Payment Sources (Percent of Revenues)
 Inpatient
 Rehabilitation
 Segment
 Home Health
 and Hospice
 Segment
 Consolidated
 Q4 Q4 Q4 Full Year
 2016 2015 2016 2015 2016 2015 2016 2015
 Medicare 73.3% 73.6% 84.3% 82.6% 75.3% 75.2% 75.2% 74.9%
 Medicare Advantage 7.8% 7.8% 8.7% 9.2% 8.0% 8.0% 7.9% 7.9%
 Managed care 10.9% 10.7% 3.9% 2.9% 9.6% 9.4% 9.8% 9.8%
 Medicaid 3.0% 2.5% 3.0% 5.1% 3.0% 2.9% 3.2% 3.0%
 Other third-party payors 1.9% 2.3% —% —% 1.5% 1.9% 1.4% 1.7%
 Workers’ compensation 1.1% 1.1% —% —% 0.9% 0.9% 0.8% 0.9%
 Patients 0.7% 0.7% —% 0.1% 0.6% 0.6% 0.5% 0.6%
 Other income 1.3% 1.3% 0.1% 0.1% 1.1% 1.1% 1.2% 1.2%
 Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
 80
 Industry Structure
 81
 Overall Healthcare Spending
 Hospital Care 
Includes Inpatient Rehabilitation, Long-Term Care Hospitals
 $840.2
 $163.3
 $88.8
 $432.0
 Nursing Care Facilities and Continuing Care Retirement Communities
 Professional Services
 Other Health, Residential and Personal Care
 Home Health Care
 Retail of Medical Products
 $154.7
 (billions)
 Personal Healthcare: $2,717.
 2
 Investment
 Net Cost of Health InsuranceGovernment Public Health
 Government Administration
 $1,036.1
 $156.8
 Source: Centers for Medicare & Medicaid Services, National Health Expenditure Data (Historical), Table 2 - 2015
 * Excludes Net Cost of Health Insurance
 National Healthcare Spending: $3,205.6 billion in 2015
 $42.6
 $80.9
 Health Consumption Spending*: $2,840.
 7
 82 Source: Centers for Medicare & Medicaid Services, Medicare Trustee’s Report July 2016 – page 10 and 
MedPAC, December 8-9, 2016 Public Meeting slides
 Medicare 2015 Spending = $647.6 Billion
 $  29.8B Skilled Nursing
 $141.7B Inpatient Hospital
 $70.3B Physician Payments
 $46.5B Outpatient Hospital
 $18.1B Home Health
 $15.9B Hospice
 $63.5B Other Services
 $172.3B Medicare Managed
                 Care
 $89.5B Outpatient Rx
 $7.4B (1%)  
Inpatient Rehabilitation Hospitals
 (Included in Inpatient Hospitals)
 14%
 3%
 7%
 10%
 11% 26%
 22%
 Medicare Part A
 Medicare Part B
 Medicare Parts A&B
 Medicare Part C
 Medicare Part D
 5%
 Inpatient hospital includes spending for acute care hospitals along with inpatient rehabilitation and long-term acute care hospital services.
 In 2015, Medicare spent $7.4 billion and $5.3 billion, respectively for inpatient rehabilitation and long-term acute care hospital services.
  
2%
 83
 Continuum of Healthcare Services
 Preventive 
Routine health care
 (screenings, check-
 ups, patient
 counseling) to prevent
 illnesses, disease, or
 other health problems.
 Home health and care
 management services
 to prevent or reduce
 acute admissions.
 Acute
 Medical treatment
 of diseases for
 which a patient is
 treated for a brief
 but severe episode
 of illness
 Ambulatory
 Medical care
 delivered on an
 outpatient basis
 (blood tests, X-
 rays, endoscopy,
 certain biopsies,
 certain surgical
 procedures)
 Post-Acute
 Medical care
 provided after a
 period of acute care
 (long-term acute
 care, inpatient
 rehabilitation, 
skilled nursing,
 home health)
 84
 Post-Acute Care Services
 Acute Care
 Hospital
 Home 
Health
 Long-Term
 Acute Care
 Hospital
 Inpatient
 Rehabilitation
 Facility
 Skilled
 Nursing
 Facility
 Discharge
 Medicare Spending (billions) $5.3 $7.4 $29.8 $18.1*
 # of Discharges ~131,000 ~381,000 ~2,300,000 ~3,500,000
 Length of Stay 26.3 days 12.8 days 40 days N/A
 # of Providers ~430 ~1,200 ~15,000 ~12,300
 Facility Ownership Mix
 For-Profit (77%)
 Non-Profit (19%)
 Gov't (4%)
 For-Profit (29%)
 Non-Profit (58%)
 Gov't (13%)
 For-Profit (70%)
 Non-Profit (25%)
 Gov't (5%)
 For-Profit (89%)
 Non-Profit (11%)
 Hospital vs. Free-standing Free-Standing (62%)Hospital Based (38%)
 Free-Standing (21%)
 Hospital Based (79%)
 Free-Standing (95%)
 Hospital Based (5%)
 Free-Standing (85%)
 Hospital Based (15%)
 Rural vs. Urban Urban (93%)Rural (7%)
 Urban (86%)
 Rural (14%)
 Urban (72%)
 Rural (28%)
 Urban (85%)
 Rural (15%)
 (Lowest Acuity)(Highest Acuity)
 Source: MedPAC, Payment Policy, March 2012 - page 266; MedPAC, Payment Policy, March 2016 - pages
 179, 228, 246, 247, 280, and 283; MedPAC, June 2016 Data Book - pages 109, 115, and 119; and
 MedPAC, December 8-9, 2016 Public Meeting slides
 * Not all home health spending occurs as a post-acute service.
 85
 $35
 $30
 $25
 $20
 $15
 $10
 $5
 $0
 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
 Medicare Spending on Post-Acute Services
 Post-Acute
 Settings
 2014
 Medicare
 Margin
 Projected
 2016
 Medicare
 Margin
 12.5%           10.7%
 10.8%            8.8%
 12.5%          13.9%
 4.9%            4.6%
  
Skilled nursing facilities
 Home health agencies*
 Inpatient rehabilitation 
hospitals
 Long-term acute care
 hospitals
 Inpatient rehabilitation
 spending (% of total
 Medicare spending)
 6
 3
 0
 (P
 er
 ce
 nt
 )
 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
 1.8 2.1 2.2 2.1 1.9 1.5 1.4 1.3 1.2 1.2 1.2 1.2 1.2 1.2 1.1
 3.2
 3.6 3.6 3.5 3.7
 3.2 3.6 3.6 3.8 3.7 3.4 3.3 3.1 2.9 2.8
 Home health spending*
 (% of total Medicare
 spending)
 Total Medicare Spending on Post-Acute Services ~$61 billion in 2015
 Source: MedPAC Healthcare Spending  and the Medicare Program, June 2016 – page 110. 
MedPAC Payment Policy, March 2016 – pages 176, 210, 238, 274, and 275; and 
MedPAC, December 8-9, 2016 Public Meeting slides
 * Not all home health spending occurs as a post-acute service.
 86
 Different Levels of Services
 Rehab Hospital Nursing Home
 Average length of stay                             = 12.8 days Average length of stay                                         = 40 days
 Discharge to community                          = 76.1% Discharge to community                       = 37.6%
 Requirements: Requirements:
 Rehab hospitals must also satisfy regulatory/policy requirements for
 hospitals, including Medicare hospital conditions of participation.
 No similar requirement; Nursing homes are regulated as nursing
 homes only
 All patients must be admitted by a rehab physician. No similar requirement
 Rehab physicians must re-confirm each admission w/n 24 hours. No similar requirement
 All patients, regardless of diagnoses/condition, must demonstrate need
 and receive at least three hours of daily intensive therapy.
 No similar requirement
 All patients must see a rehabilitation physician “in person” at least three
 times weekly.
 No similar requirement; some SNF patients may go a week or
 longer without seeing a physician, and often a non-rehabilitation
 physician.
 Rehab hospitals required to provide 24 hour, 7 days per week nursing
 care; many nurses are RNs and rehab nurses. No similar requirement
 Rehab hospitals are required to use a coordinated interdisciplinary team
 approach led by a rehab physician; includes a rehab nurse, a case
 manager, and a licensed therapist from each therapy discipline who must
 meet weekly to evaluate/discuss each patient’s case.
 No similar requirement; Nursing homes are not required to
 provide care on a interdisciplinary basis and are not required to
 hold regular meetings for each patient.
 Rehab hospitals are required to follow stringent admission/coverage
 policies and must carefully document justification for each admission;
 further restricted in number/type of patients (60% Rule) 
Nursing homes have comparatively few policies governing the
 number or types of patients they treat.
 Source: MedPAC, Medicare Payment Policy, March 2016 - Pages 186, 247, and 250;
              MedPAC, June 2016 Data Book - page 115.
 87
 Supply of IRFs is Relatively Stable
  
Average Annual Change
 Share of
 Medicare
 DischargesType of IRF 2004 2006 2008 2010 2012 2013 2014 2006-2013 2013-2014
 All IRFs 100% 1,221 1,225 1,202 1,179 1,166 1,161 1,177 -0.9% 1.4%
 Urban 93 1,024 1,018 1,001 981 973 977 1,013 -0.7 3.7
 Rural 7 197 207 201 198 193 184 164 -1.9 -10.9
 Freestanding 48 217 217 221 233 239 243 251 1.9 3.3
 Hospital based 52 1,004 1,008 981 946 927 918 926 -1.5 0.9
 Nonprofit 43 768 758 738 729 698 677 681 -1.9 0.6
 For profit 50 292 299 291 294 307 322 338 1.2 5.0
 Government 7 161 168 173 156 157 155 149 -1.3 -3.9
 Source: MedPAC, Medicare Payment Policy, March 2016 - page 246
 88
 Inpatient Rehabilitation Sector Margins
 Share of
 Medicare
 discharges Margins
 Type of IRF 2014 2004 2006 2008 2010 2011 2012 2013 2014
 All IRFs 100% 16.7% 12.4% 9.3% 8.7% 9.7% 11.2% 11.6% 12.5%
 Urban 93 17.0 12.6 9.5 9.0 10.2 11.6 12.0 13.0
 Rural 7 13.2 10.1 6.9 4.7 4.8 6.5 6.5 6.4
 Freestanding 48 24.7 17.5 18.2 21.4 23.1 23.9 24.4 25.3
 Hospital based 52 12.2 9.6 3.8 -0.5 -0.6 0.8 0.2 1.0
 Nonprofit 43 12.8 10.6 5.2 2.1 2.6 2.4 1.4 2.1
 For profit 50 24.4 16.3 16.9 19.6 20.7 23.1 23.6 24.3
 Government 7 N/A N/A N/A N/A N/A N/A N/A N/A
 Number of beds
 1 to 10 2 3.7 -3.5 -4.9 -10.1 -7.2 -6.7 -10.7 -10.7
 11 to 24 22 10.5 7.3 1.2 -3.3 -3.4 -1.0 -0.5 -0.5
 25 to 64 47 18.3 13.7 10.1 10.6 11.5 12.4 13.1 14.4
 65 or more 28 21.5 17.2 17.2 17.5 19.0 20.8 20.2 21.0
 Source: MedPAC, Medicare Payment Policy, March 2016 - page 255
 89
 Inpatient Rehabilitation Standardized Comparison of Costs
 Type of IRF
 Mean Adjusted Cost
 Per Discharge
 All IRFs $15,330
 Hospital based 16,325
 Freestanding 11,883
 Nonprofit 16,565
 For profit 13,044
 Government 16,317
 Urban 15,034
 Rural 17,036
 Number of beds
    1 to 10 18,875
    11 to 24 15,606
    25 to 64 14,867
    65 or more 12,164
 Quartile
 Characteristic Low Cost High Cost
 Percent:
   Hospital based 43% 95%
   Freestanding 57 5
   Nonprofit 30 65
   For profit 66 18
   Government 4 17
   Urban 94 70
   Rural 6 30
 Median Medicare Margin:
   All 26.1% -21.3%
   Hospital based 19.5 -21.3
   Freestanding 31.1 -21.7
 Median:
   Number of beds 42 18
   Occupancy rate 70% 50%
   Case-mix index 1.29 1.21
 Median costs per discharge:
   All $10,583 $18,888
   Hospital based 10,992 18,881
   Freestanding 10,437 19,833
 Mean adjusted costs per
 discharge are lower for
 freestanding IRFs and
 larger facilities.
 High margin IRFs 
(both hospital-based
 and freestanding) are
 concentrated in the
 low-cost quartile of
 standardized costs.
 Source: MedPAC, Medicare Payment Policy, March 2016 - page 253 and 254
 90
 “60% Rule”: Medicare Regulation for Rehabilitation Hospitals
 1983
 1983: 75% Rule
 established –
 Requires 75% of IRF
 patients to have a
 qualifying condition if
 the IRF is to maintain
 reimbursement on a
 “cost plus” basis vs.
 “prospective”
 ( i.e., fixed) basis.
 2002                    2004                          2007
 2002: IRF
 reimbursement
 transitions to
 prospective
 payment system
 (“PPS”)
 2002: CMS suspends
 75% Rule
 implementation
 2004: “New” 75%
 Rule initiated with a
 “new” list of
 “qualifying
 conditions”
 2007: 75% Rule
 permanently changed to
 “60% Rule” with passage
 of “Medicare, Medicaid &
 SCHIP Extension Act of
 2007”
 Paid for through a
 Medicare price rollback &
 18-month freeze from
 4/1/2008 to 9/30/2009
 The 60% Rule requires at least 60% of all patients admitted must have at least
 one medical diagnosis or functional impairment from a list of 13 compliant
 conditions (a.k.a. "compliant conditions" or "CMS-13").
 91
 1. Stroke
 2. Brain injury
 3. Amputation
 4. Spinal cord
 5. Fracture of the femur
 6. Neurological disorder
 7. Multiple trauma
 8. Congenital deformity
 9. Burns
 IRF Qualifying Conditions
 1. Stroke
 2. Brain injury
 3. Amputation
 4. Spinal cord
 5. Fracture of the femur
 6. Neurological disorder
 7. Multiple trauma
 8. Congenital deformity
 9. Burns
 10. Osteoarthritis (after less intensive setting)
 11. Rheumatoid arthritis (after less intensive setting) 
12. Joint replacement
 13. Systemic vasculidities (after less intensive
 setting)
 Original Qualifying Conditions Current Qualifying Conditions
 § Bilateral
 § Age ≥ 85
 § Body Mass Index >50
 10. Polyarthritis (includes "joint
 replacement")
 Became
 92
 Inpatient Rehabilitation Outlier Payments(10)
            # of Hospitals Total Outlier Payments  Avg Outlier Payment per Discharge
 Hospital
 Deciles HLS
 Non-
 HLS Total HLS Non-HLS Total  % HLS Non-HLS Total
 90-100 — 113 113 $ — $ 120,926,079 $ 120,926,079 49.9%  N/A $ 2,368 $ 2,368
 80-90 — 113 113 $ — $ 45,316,044 $ 45,316,044 18.7%  N/A $ 1,634 $ 1,634
 70-80 1 112 113 $ 250,953 $ 27,325,898 $ 27,576,851 11.4% $ 171 $ 862 $ 831
 60-70 2 111 113 $ 308,157 $ 17,778,491 $ 18,086,648 7.5% $ 130 $ 516 $ 491
 50-60 5 109 114 $ 466,754 $ 11,873,691 $ 12,340,445 5.1% $ 111 $ 422 $ 381
 40-50 19 95 114 $ 1,359,722 $ 6,961,929 $ 8,321,651 3.4% $ 78 $ 314 $ 210
 30-40 16 97 113 $ 768,273 $ 4,665,606 $ 5,433,879 2.2% $ 48 $ 183 $ 131
 20-30 18 95 113 $ 481,278 $ 2,504,414 $ 2,985,692 1.2% $ 26 $ 111 $ 73
 10-20 33 80 113 $ 346,434 $ 863,878 $ 1,210,312 0.5% $ 13 $ 37 $ 24
 0-10 25 89 114 $ 19,912 $ 87,190 $ 107,102 —% $ 1 $ 4 $ 2
 Totals 119 1,014 1,133 $ 4,001,483 $ 238,303,220 $ 242,304,703 100.0%
 Refer to pages 113-116 for end notes. 
  More      Efficient     Less
  
Outlier Observations:
 • 10% of IRFs receive 50% of the outlier payments; None of the 10% are HealthSouth. 
• HealthSouth receives approx. 1.65% of the IRF outlier payments despite treating approx. 28.4% of
 the Medicare patients/discharges.
 • As a result of outlier payments, CMS pays HealthSouth approx. $795 less per discharge than other
 providers.
 • Capping the IRF industry outlier payments at 10% of each hospital's total Medicare payments could
 save Medicare approx. $548 million over 10 years.
 93
 Segment Operating Results
 94
 Inpatient Rehabilitation Segment Adjusted EBITDA
 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year Full Year
 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015
 Net operating revenues: (In Millions)
 Inpatient $ 740.9 $ 724.1 $ 721.2 $ 719.4 $ 696.8 $ 625.1 $ 618.7 $ 606.6 $2,905.5 $2,547.2
 Outpatient and other 26.7 27.6 31.4 29.8 29.1 26.5 26.6 23.7 115.6 105.9
 Total segment revenue 767.6 751.7 752.6 749.2 725.9 651.6 645.3 630.3 3,021.1 2,653.1
 Less: Provision for doubtful accounts (13.2) (13.7) (14.5) (15.6) (13.3) (10.2) (10.2) (11.0) (57.0) (44.7)
 Net operating revenues less provision for
 doubtful accounts 754.4 738.0 738.1 733.6 712.6 641.4 635.1 619.3 2,964.1 2,608.4
 Operating expenses:
 Salaries and benefits (386.2) (371.2) (366.1) (369.9) (359.8) (326.8) (317.6) (306.4) (1,493.4) (1,310.6)
 % of revenue 50.3% 49.4% 48.6% 49.4% 49.6% 50.2% 49.2% 48.6% 49.4% 49.4%
 Other operating expenses(a) (109.8) (110.1) (106.8) (104.8) (103.2) (95.8) (93.5) (95.2) (431.5) (387.7)
 Supplies (32.7) (31.9) (31.8) (32.4) (32.3) (28.9) (29.9) (29.8) (128.8) (120.9)
 Occupancy costs (15.2) (15.0) (15.4) (15.6) (14.5) (10.6) (10.7) (10.4) (61.2) (46.2)
 (157.7) (157.0) (154.0) (152.8) (150.0) (135.3) (134.1) (135.4) (621.5) (554.8)
 % of revenue 20.5% 20.9% 20.5% 20.4% 20.7% 20.8% 20.8% 21.5% 20.6% 20.9%
 Equity in nonconsolidated affiliates 2.4 2.3 2.2 2.2 2.3 2.4 2.3 1.6 9.1 8.6
 Other income 0.8 0.8 0.7 0.6 1.3 0.1 0.4 0.5 2.9 2.3
 Noncontrolling interests (16.1) (14.3) (16.8) (16.8) (16.5) (15.6) (15.6) (15.2) (64.0) (62.9)
 Segment Adjusted EBITDA $ 197.6 $ 198.6 $ 204.1 $ 196.9 $ 189.9 $ 166.2 $ 170.5 $ 164.4 $ 797.2 $ 691.0
 In arriving at Adjusted EBITDA, the following
 was excluded:
 (a) Loss (gain) on disposal or impairment of assets $ 2.0 $ 1.6 $ 0.2 $ 0.5 $ 2.5 $ 0.9 $ 0.9 $ (1.5) $ 4.3 $ 2.8
 Reconciliations to GAAP provided on pages 98-112.
 95
 Home Health and Hospice Segment Adjusted EBITDA
 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year Full Year
 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015
 Net operating revenues: (In Millions)
 Home health revenue $ 165.2 $ 162.0 $ 157.1 $ 150.9 $ 144.4 $ 118.3 $ 111.5 $ 103.9 $ 635.2 $ 478.1
 Hospice revenue 17.1 13.1 11.0 9.7 9.0 8.7 7.6 6.4 50.9 31.7
 Total segment revenue 182.3 175.1 168.1 160.6 153.4 127.0 119.1 110.3 686.1 509.8
 Less: Provision for doubtful accounts (1.3) (1.1) (0.9) (0.9) (0.7) (0.5) (0.7) (0.6) (4.2) (2.5)
 Net operating revenues less provision for
 doubtful accounts 181.0 174.0 167.2 159.7 152.7 126.5 118.4 109.7 681.9 507.3
 Operating expenses(a)
 Cost of services (89.7) (86.8) (81.6) (78.4) (73.0) (61.7) (56.7) (53.4) (336.5) (244.8)
 % of revenue 49.2% 49.6% 48.5% 48.8% 47.6% 48.6% 47.6% 48.4% 49.0% 48.0%
 Support and overhead costs (62.7) (59.5) (58.0) (57.0) (51.0) (42.6) (41.0) (38.1) (237.2) (172.7)
 % of revenue 34.4% 34.0% 34.5% 35.5% 33.2% 33.5% 34.4% 34.5% 34.6% 33.9%
 (152.4) (146.3) (139.6) (135.4) (124.0) (104.3) (97.7) (91.5) (573.7) (417.5)
 % of revenue 83.6% 83.6% 83.0% 84.3% 80.8% 82.1% 82.0% 83.0% 83.6% 81.9%
 Equity in net income of nonconsolidated
 affiliates 0.1 0.2 0.2 0.2 0.1 — — — 0.7 0.1
 Noncontrolling interests (0.7) (2.1) (1.8) (1.9) (2.3) (1.5) (1.7) (1.3) (6.5) (6.8)
 Segment Adjusted EBITDA $ 28.0 $ 25.8 $ 26.0 $ 22.6 $ 26.5 $ 20.7 $ 19.0 $ 16.9 $ 102.4 $ 83.1
 In arriving at Adjusted EBITDA, the following
 was excluded:
 (a) Gain on disposal or impairment of assets $ (3.3) $ — $ — $ (0.3) $ (0.1) $ — $ (0.1) $ — $ (3.6) $ (0.2)
 Reconciliations to GAAP provided on pages 98-112.
 96
 Segment Operating Results
 Reconciliations to GAAP provided on pages 98-112.
 Q4 2016 Q4 2015
 IRF
 Home
 Health and
 Hospice
 Reclasses HealthSouthConsolidated IRF
 Home
 Health and
 Hospice
 Reclasses HealthSouthConsolidated
 Net operating revenues $ 767.6 $ 182.3 $ — $ 949.9 $ 725.9 $ 153.4 $ — $ 879.3
 Less: Provision for doubtful accounts (13.2) (1.3) — (14.5) (13.3) (0.7) — (14.0)
 754.4 181.0 — 935.4 712.6 152.7 — 865.3
 Operating Expenses:
 Inpatient Rehabilitation:
 Salaries and benefits (386.2) — (130.1) (516.3) (359.8) — (107.0) (466.8)
 Other operating expenses(a) (109.8) — (16.6) (126.4) (103.2) — (12.4) (115.6)
 Supplies (32.7) — (3.1) (35.8) (32.3) — (2.3) (34.6)
 Occupancy (15.2) — (2.6) (17.8) (14.5) — (2.3) (16.8)
 Home Health and Hospice:
 Cost of services sold (excluding
 depreciation and amortization) — (89.7) 89.7 — — (73.0) 73.0 —
 Support and overhead costs — (62.7) 62.7 — — (51.0) 51.0 —
 (543.9) (152.4) — (696.3) (509.8) (124.0) — (633.8)
 Other income 0.8 — — 0.8 1.3 — — 1.3
 Equity in net income of nonconsolidated
 affiliates 2.4 0.1 — 2.5 2.3 0.1 — 2.4
 Noncontrolling interest (16.1) (0.7) — (16.8) (16.5) (2.3) — (18.8)
 Segment Adjusted EBITDA $ 197.6 $ 28.0 $ — 225.6 $ 189.9 $ 26.5 $ — 216.4
 General and administrative expenses(b)(c) (26.8) (24.9)
 Adjusted EBITDA $ 198.8 $ 191.5
 In arriving at Adjusted EBITDA, the following were excluded:
 (a) Loss (gain) on disposal or
 impairment of assets
 $ 2.0 $ (3.3) $ — $ (1.3) $ 2.5 $ (0.1) $ — $ 2.4
 (b) Transaction costs — — — — — — — 6.7
 (c) Stock-based compensation — — — 10.0 — — — 4.4
 97
 Segment Operating Results
 Reconciliations to GAAP provided on pages 98-112.
 Year Ended December 31, 2016 Year Ended December 31, 2015
 IRF
 Home
 Health and
 Hospice
 Reclasses HealthSouthConsolidated IRF
 Home
 Health and
 Hospice
 Reclasses HealthSouthConsolidated
 Net operating revenues $ 3,021.1 $ 686.1 $ — $ 3,707.2 $ 2,653.1 $ 509.8 $ — $ 3,162.9
 Less: Provision for doubtful accounts (57.0) (4.2) — (61.2) (44.7) (2.5) — (47.2)
 2,964.1 681.9 — 3,646.0 2,608.4 507.3 — 3,115.7
 Operating Expenses: —
 Inpatient Rehabilitation: —
 Salaries and benefits (1,493.4) — (492.5) (1,985.9) (1,310.6) — (360.2) (1,670.8)
 Other operating expenses(a) (431.5) — (59.9) (491.4) (387.7) — (41.8) (429.5)
 Supplies (128.8) — (11.2) (140.0) (120.9) — (7.8) (128.7)
 Occupancy (61.2) — (10.1) (71.3) (46.2) — (7.7) (53.9)
 Home Health and Hospice:
 Cost of services sold (excluding
 depreciation and amortization) — (336.5) 336.5 — — (244.8) 244.8 —
 Support and overhead costs — (237.2) 237.2 — — (172.7) 172.7 —
 (2,114.9) (573.7) — (2,688.6) (1,865.4) (417.5) — (2,282.9)
 Other income 2.9 — — 2.9 2.3 — — 2.3
 Equity in net income of nonconsolidated
 affiliates 9.1 0.7 — 9.8 8.6 0.1 — 8.7
 Noncontrolling interest (64.0) (6.5) — (70.5) (62.9) (6.8) — (69.7)
 Segment Adjusted EBITDA $ 797.2 $ 102.4 $ — 899.6 $ 691.0 $ 83.1 $ — 774.1
 General and administrative expenses(b)(c) (106.0) (94.8)
 Gain related to SCA equity interest — 3.2
 Adjusted EBITDA $ 793.6 $ 682.5
 In arriving at Adjusted EBITDA, the following were excluded:
 (a) Loss (gain) on disposal or
 impairment of assets
 $ 4.3 $ (3.6) $ — $ 0.7 $ 2.8 $ (0.2) $ — $ 2.6
 (b) Transaction costs — — — — — — — 12.3
 (c) Stock-based compensation — — — 27.4 — — — 26.2
 98
 Reconciliations to GAAP
 and Share Information
 99
 Reconciliation of Net Income to Adjusted EBITDA(1)
 2016
 Q1 Q2 Q3 Q4 Full Year
 (in millions, except per share data) Total
 Per
 Share Total
 Per
 Share Total
 Per
 Share Total
 Per
 Share Total
 Per
 Share
 Net Income $ 76.7 $ 81.2 $ 78.1 $ 82.1 $ 318.1
 Loss (income) from disc ops, net of tax, attributable
 to HealthSouth 0.1 0.1 0.1 (0.3) —
 Net income attributable to noncontrolling interests (18.7) (18.6) (16.4) (16.8) (70.5)
 Income from continuing operations attributable
 to HealthSouth* 58.1 $ 0.61 62.7 $ 0.65 61.8 $ 0.64 65.0 $ 0.68 247.6 $ 2.59
 Pro fees - acct, tax, and legal 0.2 1.7 — — 1.9
 Provision for income tax expense 39.7 42.4 42.1 39.7 163.9
 Interest expense and amortization of debt discounts
 and fees 44.6 43.4 42.5 41.6 172.1
 Depreciation and amortization 42.4 42.9 43.5 43.8 172.6
 Loss on early extinguishment of debt 2.4 2.4 2.6 — 7.4
 Net noncash loss (gain) on disposal or impairment
 of assets 0.2 0.2 1.6 (1.3) 0.7
 Stock-based compensation expense 4.5 8.6 4.3 10.0 27.4
 Adjusted EBITDA $ 192.1 $ 204.3 $ 198.4 $ 198.8 $ 793.6
 Weighted average common shares outstanding:
 Basic 89.5 89.3 89.1 88.6 89.1
 Diluted 99.4 99.4 99.4 99.2 99.5
 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding.
 Refer to pages 113-116 for end notes.
 100
 Reconciliation of Net Income to Adjusted EBITDA(1)
 2015
 Q1 Q2 Q3 Q4 Full Year
 (in millions, except per share data) Total
 Per
 Share Total
 Per
 Share Total
 Per
 Share Total
 Per
 Share Total
 Per
 Share
 Net Income $ 59.0 $ 60.2 $ 67.8 $ 65.8 $ 252.8
 Loss (income) from disc ops, net of tax, attributable
 to HealthSouth 0.3 1.6 (0.3) (0.7) 0.9
 Net income attributable to noncontrolling interests (16.5) (17.3) (17.1) (18.8) (69.7)
 Income from continuing operations attributable
 to HealthSouth* 42.8 $ 0.44 44.5 $ 0.47 50.4 $ 0.52 46.3 $ 0.48 184.0 $ 1.92
 Gov't, class action, and related settlements 8.0 — — (0.5) 7.5
 Pro fees - acct, tax, and legal 2.2 0.1 0.4 0.3 3.0
 Provision for income tax expense 30.3 32.2 35.9 43.5 141.9
 Interest expense and amortization of debt discounts
 and fees 31.8 30.9 35.6 44.6 142.9
 Depreciation and amortization 31.9 32.7 33.7 41.4 139.7
 Loss on early extinguishment of debt 1.2 18.8 — 2.4 22.4
 Net noncash (gain) loss on disposal or impairment
 of assets (1.5) 0.8 0.9 2.4 2.6
 Stock-based compensation expense 9.4 6.2 6.2 4.4 26.2
 Transaction costs — 3.3 2.3 6.7 12.3
 Adjusted EBITDA $ 156.1 $ 169.5 $ 165.4 $ 191.5 $ 682.5
 Weighted average common shares outstanding:
 Basic 87.1 89.8 90.6 90.1 89.4
 Diluted 101.1 101.5 101.5 100.6 101.0
 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding.
 Refer to pages 113-116 for end notes.
 101
 Reconciliation of Net Income to Adjusted EBITDA(1)
 2012 2013 2014
 (in millions, except per share data) Total Per Share Total Per Share Total Per Share
 Net income $ 235.9 $ 381.4 $ 281.7
 (Income) loss from disc ops, net of tax, attributable to HealthSouth (4.5) 1.1 (5.5)
 Net income attributable to noncontrolling interests (50.9) (57.8) (59.7)
 Income from continuing operations attributable to HealthSouth* 180.5 $ 1.62 324.7 $ 2.59 216.5 $ 2.24
 Gov't, class action, and related settlements (3.5) (23.5) (1.7)
 Pro fees-acct, tax, and legal 16.1 9.5 9.3
 Provision for income tax expense 108.6 12.7 110.7
 Interest expense and amortization of debt discounts and fees 94.1 100.4 109.2
 Depreciation and amortization 82.5 94.7 107.7
 Other, including net noncash loss on disposal of assets 4.4 5.9 6.7
 Loss on early extinguishment of debt 4.0 2.4 13.2
 Gain on consolidation of Fairlawn Rehabilitation Hospital — — (27.2)
 Gain on consolidation of St. Vincent Rehabilitation Hospital (4.9) — —
 Stock-based compensation expense 24.1 24.8 23.9
 Transaction costs — — 9.3
 Adjusted EBITDA $ 505.9 $ 551.6 $ 577.6
 Weighted average common shares outstanding:
 Basic 94.6 88.1 86.8
 Diluted 108.1 102.1 100.7
 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding.
 Refer to pages 113-116 for end notes.
 102
 Reconciliation of Segment Adjusted EBITDA to Income
 from Continuing Operations Before Income Tax Expense
 Q4
 2016
 Q3
 2016
 Q2
 2016
 Q1
 2016
 Q4
 2015
 Q3
 2015
 Q2
 2015
 Q1
 2015
 Full
 Year
 2016
 Full
 Year
 2015
 In Millions
 Total segment Adjusted EBITDA $ 225.6 $ 224.4 $ 230.1 $ 219.5 $ 216.4 $ 186.9 $ 189.5 $ 181.3 $ 899.6 $ 774.1
 General and administrative expenses (36.8) (30.3) (34.4) (31.9) (36.0) (30.6) (32.1) (34.6) (133.4) (133.3)
 Depreciation and amortization (43.8) (43.5) (42.9) (42.4) (41.4) (33.7) (32.7) (31.9) (172.6) (139.7)
 Gain (loss) on disposal or impairment of
 assets 1.3 (1.6) (0.2) (0.2) (2.4) (0.9) (0.8) 1.5 (0.7) (2.6)
 Government, class action, and related
 settlements — — — — 0.5 — — (8.0) — (7.5)
 Professional fees - accounting, tax, and
 legal — — (1.7) (0.2) (0.3) (0.4) (0.1) (2.2) (1.9) (3.0)
 Loss on early extinguishment of debt — (2.6) (2.4) (2.4) (2.4) — (18.8) (1.2) (7.4) (22.4)
 Interest expense and amortization of debt
 discounts and fees (41.6) (42.5) (43.4) (44.6) (44.6) (35.6) (30.9) (31.8) (172.1) (142.9)
 Net income attributable to noncontrolling
 interests 16.8 16.4 18.6 18.7 18.8 17.1 17.3 16.5 70.5 69.7
 Gain related to SCA equity interest — — — — — 0.6 2.6 — — 3.2
 Income from continuing operations
 before income tax expense $ 121.5 $ 120.3 $ 123.7 $ 116.5 $ 108.6 $ 103.4 $ 94.0 $ 89.6 $ 482.0 $ 395.6
 103
 Adjusted EPS(2) - Q4 2016
 For the Three Months Ended December 31, 2016
 Adjustments
 As
 Reported
 Mark-to-
 Market
 Adjustment
 for Stock
 Appreciation
 Rights
 Sale of
 Pediatric
 Home Health
 Assets and
 Hospital
 Income Tax
 Valuation
 and Other
 Adjustments
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 198.8 $ — $ — $ — $ 198.8
 Depreciation and amortization (43.8) — — — (43.8)
 Interest expense and amortization of debt discounts
 and fees (41.6) — — — (41.6)
 Stock-based compensation (10.0) 3.0 — — (7.0)
 Loss on disposal or impairment of assets 1.3 — (3.3) — (2.0)
 Income from continuing operations before
 income tax expense 104.7 3.0 (3.3) — 104.4
 Provision for income tax expense (39.7) (1.1) 6.1 (0.6) (35.3)
 Income from continuing operations
 attributable to HealthSouth $ 65.0 $ 1.9 $ 2.8 $ (0.6) $ 69.1
 Add: Interest on convertible debt, net of tax 2.5 2.5
 Numerator for diluted earnings per share $ 67.5 $ 71.6
 Diluted earnings per share from continuing
 operations* $ 0.68 $ 0.02 $ 0.03 $ (0.01) $ 0.72
 Diluted shares used in calculation 99.2
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 104
 For the Three Months Ended December 31, 2015
 Adjustments
 As
 Reported
 Gov’t, Class
 Action, &
 Related
 Settlements
 Pro.
 Fees -
 Acct.,
 Tax, &
 Legal
 Income
 Tax
 Valuation
 Allowance
 & Other
 Adj.
 Transaction
 Costs
 Loss on
 Early
 Exting.
 of Debt
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 191.5 $ — $ — $ — $ — $ — $ 191.5
 Depreciation and amortization (41.4) — — — — — (41.4)
 Government, class action, and related
 settlements 0.5 (0.5) — — — — —
 Professional fees - accounting, tax, and legal (0.3) — 0.3 — — — —
 Loss on early extinguishment of debt (2.4) — — — — 2.4 —
 Interest expense and amortization of debt
 discounts and fees (44.6) — — — — — (44.6)
 Stock-based compensation (4.4) — — — — — (4.4)
 Loss on disposal or impairment of assets (2.4) — — — — — (2.4)
 Transaction costs (6.7) — — — 6.7 — —
 Income from continuing operations
 before income tax expense 89.8 (0.5) 0.3 — 6.7 2.4 98.7
 Provision for income tax expense (43.5) 0.2 (0.1) 4.7 (2.1) (1.0) (41.8)
 Income from continuing operations
 attributable to HealthSouth $ 46.3 $ (0.3) $ 0.2 $ 4.7 $ 4.6 $ 1.4 $ 56.9
 Add: Interest on convertible debt, net of tax 2.4 2.4
 Numerator for diluted earnings per share $ 48.7 $ 59.3
 Diluted earnings per share from continuing
 operations* $ 0.48 $ — $ — $ 0.05 $ 0.05 $ 0.01 $ 0.59
 Diluted shares used in calculation 100.6
 Adjusted EPS(2) - Q4 2015
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 105
 Adjusted EPS(2) - 2016
 For the Year Ended December 31, 2016
 Adjustments
 As
 Reported
 Pro.
 Fees -
 Acct.,
 Tax, &
 Legal
 Mark-to-
 Market
 Adjustment
 for Stock
 Appreciation
 Rights
 Loss
 on
 Early
 Exting.
 of Debt
 Sale of
 Pediatric
 Home Health
 Assets and
 Hospital
 Income Tax
 Valuation
 and Other
 Adjustments
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 793.6 $ — $ — $ — $ — $ — $ 793.6
 Depreciation and amortization (172.6) — — — — — (172.6)
 Professional fees - accounting, tax, and legal (1.9) 1.9 — — — — —
 Loss on early extinguishment of debt (7.4) — — 7.4 — — —
 Interest expense and amortization of debt
 discounts and fees (172.1) — — — — — (172.1)
 Stock-based compensation (27.4) — 1.6 — — — (25.8)
 Loss on disposal or impairment of assets (0.7) — — — (4.2) — (4.9)
 Income from continuing operations
 before income tax expense 411.5 1.9 1.6 7.4 (4.2) — 418.2
 Provision for income tax expense (163.9) (0.8) (0.6) (3.0) 6.5 (0.6) (162.4)
 Income from continuing operations
 attributable to HealthSouth $ 247.6 $ 1.1 $ 1.0 $ 4.4 $ 2.3 $ (0.6) $ 255.8
 Add: Interest on convertible debt, net of tax 9.7 9.7
 Numerator for diluted earnings per share $ 257.3 $ 265.5
 Diluted earnings per share from continuing
 operations* $ 2.59 $ 0.01 $ 0.01 $ 0.04 $ 0.02 $ (0.01) $ 2.67
 Diluted shares used in calculation 99.5
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 106
 Adjusted EPS(2) - 2015
 For the Year Ended December 31, 2015
 As
 Reported
 Gov’t,
 Class
 Action, &
 Related
 Settlements
 Pro.
 Fees -
 Acct.,
 Tax, &
 Legal
 Income
 Tax
 Valuation
 & Other
 Adj.
 Mark-to-
 Market
 Adjustment
 for Stock
 Appreciation
 Rights
 Transaction
 Costs
 Loss
 on
 Early
 Exting.
 of Debt
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 682.5 $ — $ — $ — $ — $ — $ — $ 682.5
 Depreciation and amortization (139.7) — — — — — — (139.7)
 Government, class action, and related
 settlements (7.5) 7.5 — — — — — —
 Professional fees - accounting, tax, and
 legal (3.0) — 3.0 — — — — —
 Loss on early extinguishment of debt (22.4) — — — — — 22.4 —
 Interest expense and amortization of debt
 discounts and fees (142.9) — — — — — — (142.9)
 Stock-based compensation (26.2) — — — 1.2 — — (25.0)
 Loss on disposal or impairment of assets (2.6) — — — — — — (2.6)
 Transaction costs (12.3) — — — — 12.3 — —
 Income from continuing operations
 before income tax expense 325.9 7.5 3.0 — 1.2 12.3 22.4 372.3
 Provision for income tax expense (141.9) (3.0) (1.2) 4.7 (0.5) (4.1) (9.0) (155.0)
 Income from continuing operations
 attributable to HealthSouth $ 184.0 $ 4.5 $ 1.8 $ 4.7 $ 0.7 $ 8.2 $ 13.4 $ 217.3
 Add: Interest on convertible debt, net
 of tax 9.4 9.4
 Numerator for diluted earnings per
 share $ 193.4 $ 226.7
 Diluted earnings per share from
 continuing operations* $ 1.92 $ 0.04 $ 0.02 $ 0.05 $ 0.01 $ 0.08 $ 0.13 $ 2.24
 Diluted shares used in calculation 101.0
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 107
 For the Year Ended December 31, 2014
 Adjustments
 As
 Reported
 Gov't, Class
 Action, and
 Related
 Settlements
 Pro. Fees -
 Acct, Tax,
 and Legal
 Transaction
 Costs
 Gain on
 Consolidation
 of Fairlawn
 Rehabilitation
 Hospital
 Loss on
 Early
 Exting. of
 Debt
 Income Tax
 Valuation
 Adjustment
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 577.6 $ — $ — $ — $ — $ — $ — $ 577.6
 Depreciation and amortization (107.7) — — — — — — (107.7)
 Government, class action, and related
 settlements 1.7 (1.7) — — — — — —
 Professional fees - accounting, tax, and legal (9.3) — 9.3 — — — — —
 Loss on early extinguishment of debt (13.2) — — — — 13.2 — —
 Interest expense and amortization of debt
 discounts and fees (109.2) — — — — — — (109.2)
 Stock-based compensation (23.9) — — — — — — (23.9)
 Loss on disposal or impairment of assets (6.7) — — — — — — (6.7)
 Gain on consolidation of Fairlawn Rehabilitation
 Hospital 27.2 — — — (27.2) — — —
 Transaction costs (9.3) — — 9.3 — — — —
 Income from continuing operations
 before income tax expense 327.2 (1.7) 9.3 9.3 (27.2) 13.2 — 330.1
 Provision for income tax expense (110.7) 0.7 (3.7) (2.5) (3.0) (5.3) (7.4) (131.9)
 Income from continuing operations
 attributable to HealthSouth $ 216.5 $ (1.0) $ 5.6 $ 6.8 $ (30.2) $ 7.9 $ (7.4) $ 198.2
 Add: Interest on convertible debt, net of tax 9.0 9.0
 Numerator for diluted earnings per share $ 225.5 $ 207.2
 Diluted earnings per share from continuing
 operations* $ 2.24 $ (0.01) $ 0.06 $ 0.07 $ (0.30) $ 0.08 $ (0.07) $ 2.06
 Diluted shares used in calculation 100.7
 Adjusted EPS(2) - 2014
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 108
 For the Year Ended December 31, 2013
 Adjustments
 As
 Reported
 Gov't, Class
 Action, and
 Related
 Settlements
 Pro. Fees -
 Acct., Tax,
 and Legal
 Loss on
 Early
 Exting. of
 Debt
 Income Tax
 Valuation
 Allowance
 Adjustment
 Settlement
 of Income
 Tax Claims
 Repurchase
 of Preferred
 Stock
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 551.6 $ — $ — $ — $ — $ — $ — $ 551.6
 Depreciation and amortization (94.7) — — — — — — (94.7)
 Government, class action, and related settlements 23.5 (23.5) — — — — — —
 Professional fees - accounting, tax, and legal (9.5) — 9.5 — — — — —
 Loss on early extinguishment of debt (2.4) — — 2.4 — — — —
 Interest expense and amortization of debt discounts
 and fees (100.4) — — — — — — (100.4)
 Stock-based compensation (24.8) — — — — — — (24.8)
 Loss on disposal or impairment of assets (5.9) — — — — — — (5.9)
 Income from continuing operations before
 income tax expense 337.4 (23.5) 9.5 2.4 — — — 325.8
 Provision for income tax expense (12.7) 9.4 (3.8) (1.0) (9.1) (113.4) — (130.6)
 Income from continuing operations
 attributable to HealthSouth $ 324.7 $ (14.1) $ 5.7 $ 1.4 $ (9.1) $ (113.4) $ — $ 195.2
 Less: Income allocated to participating securities (3.4) (3.4)
 Less: Convertible perpetual preferred dividends (21.0) (21.0)
 Less: Repurchase of perpetual preferred stock (71.6) 71.6 —
 Numerator for basic earnings per share $ 228.7 $ 170.8
 Basic earnings per share from continuing
 operations* $ 2.59 $ (0.16) $ 0.06 $ 0.02 $ (0.10) $ (1.29) $ 0.81 $ 1.94
 Basic shares used in calculation 88.1
 Adjusted EPS(2) - 2013
 Basic and diluted earnings per share are the same due to antidilution.
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 109
 For the Year Ended December 31, 2012
 Adjustments
 As
 Reported
 Gov't, Class
 Action, and
 Related
 Settlements
 Pro. Fees -
 Acct, Tax,
 and Legal
 Gain on
 Consolidation
 of St. Vincent
 Rehabilitation
 Hospital
 Loss on
 Early
 Exting. of
 Debt
 Income Tax
 Valuation
 Allowance
 Adjustment
 Settlement
 of Income
 Tax Claims
 As
 Adjusted
 (In Millions, Except Per Share Amounts)
 Adjusted EBITDA $ 505.9 $ — $ — $ — $ — $ — $ — $ 505.9
 Depreciation and amortization (82.5) — — — — — — (82.5)
 Government, class action, and related settlements 3.5 (3.5) — — — — — —
 Professional fees - accounting, tax, and legal (16.1) — 16.1 — — — — —
 Loss on early extinguishment of debt (4.0) — — — 4.0 — — —
 Interest expense and amortization of debt discounts
 and fees (94.1) — — — — — — (94.1)
 Stock-based compensation (24.1) — — — — — — (24.1)
 Loss on disposal or impairment of assets (4.4) — — — — — — (4.4)
 Gain on consolidation of St. Vincent Rehabilitation
 Hospital 4.9 — — (4.9) — — — —
 Income from continuing operations before
 income tax expense 289.1 (3.5) 16.1 (4.9) 4.0 — — 300.8
 Provision for income tax expense (108.6) 1.4 (6.4) 2.0 (1.6) (9.5) 1.0 (121.7)
 Income from continuing operations
 attributable to HealthSouth $ 180.5 $ (2.1) $ 9.7 $ (2.9) $ 2.4 $ (9.5) $ 1.0 $ 179.1
 Less: Income allocated to participating securities (2.2) (2.2)
 Less: Convertible perpetual preferred dividends (23.9) (23.9)
 Less: Repurchase of preferred stock (0.8) (0.8)
 Numerator for basic earnings per share $ 153.6 $ 152.2
 Basic earnings per share from continuing
 operations* $ 1.62 $ (0.02) $ 0.10 $ (0.03) $ 0.03 $ (0.10) $ 0.01 $ 1.61
 Basic shares used in calculation 94.6
 Adjusted EPS(2) - 2012
 Basic and diluted earnings per share are the same due to antidilution.
   Reconciliation to GAAP provided on pages 99-101. Refer to pages 113-116 for end notes.
 * Adjusted EPS may not sum across due to rounding.
 110
 Adjusted Free Cash Flow History(3)
 Q4 Full Year
 (Millions) 2016 2015 2016 2015 2014 2013 2012
 Net cash provided by operating activities $ 116.0 $ 116.6 $ 605.5 $ 484.8 $ 444.9 $ 470.3 $ 411.5
 Impact of discontinued operations 0.1 (0.1) 0.7 0.7 1.2 1.9 (2.0)
 Net cash provided by operating
 activities of continuing operations 116.1 116.5 606.2 485.5 446.1 472.2 409.5
 Capital expenditures for maintenance (39.7) (27.1) (104.2) (83.1) (92.0) (74.8) (83.0)
 Dividends paid on convertible perpetual
 preferred stock — — — (3.1) (6.3) (23.0) (24.6)
 Distributions paid to noncontrolling interests
 of consolidated affiliates (15.4) (14.8) (64.9) (54.4) (54.1) (46.3) (49.3)
 Items non-indicative of ongoing operations:
 Transaction costs and related assumed liabilities — 6.5 0.8 28.3 2.0 — —
 Net premium on bond issuance/repayment — 1.9 5.8 4.0 4.3 1.7 1.9
 Cash paid for professional fees - accounting, tax, and
 legal — 0.3 1.9 4.1 8.6 7.0 16.1
 Windfall tax benefits from share-based compensation 17.3 — 17.3 — — — —
 Cash (received) paid for government, class action, and
 related settlements — (0.3) — 7.7 2.7 (5.9) (2.6)
 Adjusted free cash flow $ 78.3 $ 83.0 $ 462.9 $ 389.0 $ 311.3 $ 330.9 $ 268.0
 Cash dividends on common stock(6) $ 21.4 $ 21.0 $ 83.8 $ 77.2 $ 65.8 $ 15.7 $ —
 Refer to pages 113-116 for end notes. 
Information regarding investing and financing categories of the statement of cash flows for the periods presented can be found on HealthSouth's
 website in the Earnings Releases for those periods.
 111
 Net Cash Provided by Operating Activities Reconciled 
to Adjusted EBITDA
 Q4 Full Year
 (Millions) 2016 2015 2016 2015 2014 2013 2012
 Net cash provided by operating activities $ 116.0 $ 116.6 $ 605.5 $ 484.8 $ 444.9 $ 470.3 $ 411.5
 Provision for doubtful accounts (14.5) (14.0) (61.2) (47.2) (31.6) (26.0) (27.0)
 Professional fees - accounting, tax, and legal — 0.3 1.9 3.0 9.3 9.5 16.1
 Interest expense and amortization of debt discounts and
 fees 41.6 44.6 172.1 142.9 109.2 100.4 94.1
 Equity in net income of nonconsolidated affiliates 2.5 2.4 9.8 8.7 10.7 11.2 12.7
 Net income attributable to noncontrolling interests in
 continuing operations (16.8) (18.8) (70.5) (69.7) (59.7) (57.8) (50.9)
 Amortization of debt discounts and fees (3.5) (3.4) (13.8) (14.3) (12.7) (5.0) (3.7)
 Distributions from nonconsolidated affiliates (2.6) (3.2) (8.5) (7.7) (12.6) (11.4) (11.0)
 Current portion of income tax expense 17.4 4.4 31.0 14.8 13.3 6.3 5.9
 Change in assets and liabilities 41.3 53.6 102.9 147.1 90.1 48.9 58.1
 Net premium paid on bond transactions — 1.9 5.8 3.9 4.3 1.7 1.9
 Windfall tax benefits from share-based compensation 17.3 — 17.3 — — — —
 Cash used in (provided by) operating activities of
 discontinued operations 0.1 (0.1) 0.7 0.7 1.2 1.9 (2.0)
 Transaction costs — 6.7 — 12.3 9.3 — —
 Other — 0.5 0.6 3.2 1.9 1.6 0.2
 Adjusted EBITDA $ 198.8 $ 191.5 $ 793.6 $ 682.5 $ 577.6 $ 551.6 $ 505.9
 Information regarding investing and financing categories of the statement of cash flows for the periods presented can be found on HealthSouth's
 website in the Earnings Releases for those periods.
 112
 Share Information
 Refer to pages 113-116 for end notes.
 Weighted Average for the Period
 Q4 Full Year
 (Millions) 2016 2015 2016 2015 2014
 Basic shares outstanding(4) 88.6 90.1 89.1 89.4 86.8
 Convertible perpetual preferred stock(4) — — — 1.0 3.2
 Convertible senior subordinated notes(28) 8.6 8.4 8.5 8.3 8.2
 Restricted stock awards, dilutive stock options,
 restricted stock units, and common stock warrants(29) 2.0 2.1 1.9 2.3 2.5
 Diluted shares outstanding 99.2 100.6 99.5 101.0 100.7
 End of Period
 Q4 Full Year
 (Millions) 2016 2015 2016 2015 2014
 Basic shares outstanding(4) 88.3 89.3 88.3 89.3 86.6
 Approx. Approx.
 Date Conversion Rate Conversion Price
 Convertible senior subordinated notes(28) 1/3/17 26.9106 $37.16
 113
 End Notes
 114
 End Notes
 (1) Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four
 quarters) is, likewise, a non-GAAP measure. Management and some members of the investment community utilize Adjusted EBITDA as a financial
 measure and the leverage ratio as a liquidity measure on an ongoing basis. These measures are not recognized in accordance with GAAP and should
 not be viewed as an alternative to GAAP measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should be aware that in the
 future HealthSouth may incur expenses similar to the adjustments set forth. Further explanation and disclosure relating to Adjusted EBITDA are included
 in the Company's Form 8-K, dated March 6, 2017, to which this Investor Reference Book is attached as Exhibit 99.1.
 (2) HealthSouth is providing adjusted earnings per share from continuing operations attributable to HealthSouth (“adjusted earnings per share”), which is a
 non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because
 it provides better comparability of ongoing performance to prior periods given that it excludes the impact of government, class action, and related
 settlements, professional fees - accounting, tax, and legal, mark-to-market adjustments for stock appreciation rights, gains or losses related to hedging
 instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments and settlements of
 income tax claims), items related to corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operations. It is
 reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period
 to period and may not directly relate to the Company's ongoing operations. Accordingly, they can complicate comparisons of the Company's results of
 operations across periods and comparisons of the Company's results to those of other healthcare companies. Adjusted earnings per share should not
 be considered as a measure of financial performance under generally accepted accounting principles in the United States as the items excluded from it
 are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement
 determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled
 measures of other companies. Further explanation and disclosure relating to adjusted EPS are included in the Company's Form 8-K, dated March 6,
 2017, to which this Investor Reference Book is attached as Exhibit 99.1.
 (3) Definition of adjusted free cash flow, which is a non-GAAP measure, is net cash provided by operating activities of continuing operations minus capital
 expenditures for maintenance, dividends paid on preferred stock, distributions to noncontrolling interests, and certain other items deemed to be non-
 indicative of ongoing operations. Common stock dividends are not included in the calculation of adjusted free cash flow. Because this measure is not
 determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented
 by other companies. Further explanation and disclosure relating to adjusted free cash flow are included in the Company's Form 8-K, dated March 6,
 2017, to which this Investor Reference Book is attached as Exhibit 99.1.
 (4) In March 2006, the Company completed the sale of 400,000 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. In Q4 2013, the
 Company exchanged $320 million of newly issued 2.0% Convertible Senior Subordinated Notes due 2043 for 257,110 shares of its outstanding
 preferred stock. In April 2015, the Company exercised its rights to force conversion of all outstanding shares of preferred stock. On the conversion date,
 each outstanding share of preferred stock was converted into 33.9905 shares of common stock, resulting in the issuance of 3,271,415 shares of
 common stock.
 (5) The contractual debt repayment obligations in 2017 includes ~$15 million of capital lease payments and ~$1 million of other notes payable.
 (6) On July 16, 2015, the board of directors approved a $0.02 per share, or 9.5%, increase to the quarterly cash dividend on the Company’s common stock,
 bringing the quarterly cash dividend to $0.23 per common share. On July 21, 2016, the board of directors approved a $0.01 per share, or 4.3%, increase
 to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.24 per common share.
 (7) Under this program, Joint Commission accredited organizations, like the Company's hospitals, may seek certification for chronic diseases or conditions
 such as brain injury or stroke rehabilitation by complying with Joint Commission standards, effectively using evidence-based clinical practice guidelines
 to manage and optimize patient care, and using an organized approach to performance measurement and evaluation of clinical outcomes. Obtaining
 such certifications demonstrates the Company's commitment to excellence in providing disease-specific care.
 115
 (8) Data compares HealthSouth hospitals to hospitals comprising the Uniform Data System for Medical Rehabilitation (“UDSMR”), a data gathering and
 analysis organization for the rehabilitation industry which represents approximately 70% of the industry, including HealthSouth sites. Data is adjusted by
 applying HealthSouth hospital case-mix to non-HealthSouth UDS hospitals.
 (9) Source: https://data.medicare.gov/data/home-health-compare. Data on this page was published in January 2017 and reflects OASIS and HHCAHPS
 Survey data collected from July 2015 through June 2016 and claims-based data collected from April 2015 through March 2016.
 (10) Source: FY 2017 CMS Final Rule Rate Setting File and the last publicly available Medicare cost reports (FYE 2014/2015) or in the case of new IRFs, the
 June 2016 CMS Provider of Service File.
 a. All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2017 IRF Final Rule Rate Setting
 File found at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Downloads/FY2017_datafiles_final.zip. The
 data presented was developed entirely by CMS and is based on its definitions which are different in form and substance from the criteria HealthSouth
 uses for external reporting purposes. Because CMS does not provide its detailed methodology, HealthSouth is not able to reconstruct the CMS
 projections or the calculation.
 b.The CMS file contains data for each of the 1,133 inpatient rehabilitation facilities used to estimate the policy updates for the FY 2017 IRF-PPS Final
 Rule. Most of the data represents historical information from the CMS fiscal year 2015 period and may or may not reflect the same HealthSouth
 hospitals in operation today. The data presented was separated into three categories: Freestanding, Units, and HealthSouth. HealthSouth is a subset
 of Freestanding and the Total.
 (11) The 119 for HLS excludes the inpatient rehabilitation hospital at HealthSouth Rehabilitation Hospital of Franklin (opened December 2015); CHI St. Vincent
 Hot Springs Rehabilitation Hospital, an affiliate of HealthSouth (opened February 2016); HealthSouth Rehabilitation Hospital of Beaumont (sold
 June 2016); St. Joseph HealthSouth Rehabilitation Hospital (opened August 2016); St. John Rehabilitation Hospital, affiliated with HealthSouth (opened
 August 2016); and HealthSouth Rehabilitation Hospital of Modesto (opened October 2016).
 (12) In 2015, HealthSouth averaged 1,332 total Medicare and non-Medicare discharges per hospital in its then 107 consolidated hospitals that were open the
 full year.
 (13) Case Mix Index (CMI) from the rate-setting file is adjusted for short-stay transfer cases. HealthSouth’s unadjusted CMI for 2015 was 1.36 versus 1.31 for
 the industry as measured by UDSMR.
 (14) The Budget Control Act of 2011 included a reduction of up to 2% to Medicare payments for all providers that began on April 1, 2013 (as modified by
 H.R. 8). The reduction was made from whatever level of payment would otherwise have been provided under Medicare law and regulation.
 (15) HealthSouth acquired an additional 30% equity interest in Fairlawn Rehabilitation Hospital in Worcester, MA from its joint venture partner. This transaction
 increased HealthSouth's ownership interest from 50% to 80% and resulted in a change in accounting for the hospital from the equity method to a
 consolidated entity effective June 1, 2014.
 (16) Data provided by UDSMR.
 (17) The Medicare Access and CHIP Reauthorization Act of 2015 mandated a market basket update of +1.0% in 2018 for post-acute providers including
 rehabilitation hospitals as well as home health and hospice agencies.
 (18) The Company estimates the expected impact of each rule utilizing, among other things, the acuity of its patients over the 8-month (home health segment)
 to 12-month (inpatient rehabilitation segment) period prior to each rule’s release and incorporates other adjustments included in each rule. These
 estimates are prior to the impact of sequestration.
 (19) Quality reporting requirements and potential penalties were enabled for IRFs as part of the Healthcare Reform Bill (PPACA). The IMPACT Act of 2014
 requires additional quality and clinical data reporting for IRFs to be subject to the original 2% penalty.
 End Notes, con't.
 116
 (20) Pre-opening expenses include expenses for training new employees on the clinical information system, which vary based on the timing of the first
 admission.
 (21) CMS published an updated Bundled Payments for Care Episode analytic file in January 2017. Among other data, this file provided the most recent listing
 of Model 2 awardees and the clinical episodes each participant selected for a bundled payment arrangement.
 (22) The leverage ratio is based on trailing four quarters of Adjusted EBITDA of $793.6 million from Q1 2016 to Q4 2016.
 (23) Represents discharges from 122 consolidated hospitals in Q4 2016; 121 consolidated hospitals in Q3 2016; 120 consolidated hospitals in Q2 2016; 121
 consolidated hospitals in Q1 2016; 120 consolidated hospitals in Q4 2015; 108 consolidated hospitals in Q3 2015 and Q2 2015; and 106 consolidated
 hospitals in Q1 2015
 (24) Excludes approximately 420 full-time equivalents in the 2016 periods and approximately 400 full-time equivalents in the 2015 periods presented who are
 considered part of corporate overhead with their salaries and benefits included in general and administrative expenses in the Company’s consolidated
 statements of operations. Full-time equivalents included in the table represent HealthSouth employees who participate in or support the operations of the
 Company’s hospitals.
 (25) Employees per occupied bed, or "EPOB," is calculated by dividing the number of full-time equivalents, including an estimate of full-time equivalents from
 the utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is determined by multiplying the number
 of licensed beds by the Company's occupancy percentage.
 (26) Represents home health admissions from 186 consolidated locations in Q4 2016; 188 consolidated locations in Q3 2016; 187 consolidated locations in Q2
 2016; 184 consolidated locations in Q1 2016 and Q4 2015; 141 consolidated locations in Q3 2015; 139 consolidated locations in Q2 2015; and 143
 consolidated locations in Q1 2015
 (27) Represents hospice admissions from 35 locations in Q4 2016; 33 locations in Q3 2016; 29 locations in Q2 2016; 27 locations in Q1 2016 and Q4 2015; 23
 locations in Q3 2015; and 21 locations in Q2 2015 and Q1 2015.
 (28) In November 2013, the Company closed separate, privately negotiated exchanges in which it issued $320 million of 2.0% Convertible Senior Subordinated
 Notes due 2043 in exchange for 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. The Company recorded ~$249 million as debt
 and ~$71 million as equity. The convertible notes are convertible, at the option of the holders, at any time on or prior to the close of business on the
 business day immediately preceding December 1, 2043 into shares of the Company’s common stock and is subject to customary antidilution adjustments.
 The Company has the right to redeem the convertible notes before December 1, 2018 if the volume weighted-average price of the Company’s common
 stock is at least 120% of the conversion price of the convertible notes for a specified period. On or after December 1, 2018, the Company may, at its
 option, redeem all or any part of the convertible notes. In either case, the redemption price will be equal to 100% of the principal amount of the convertible
 notes to be redeemed, plus accrued and unpaid interest.
 (29) The agreement to settle the Company’s class action securities litigation received final court approval in January 2007. The 5.0 million shares of common
 stock and warrants to purchase ~8.2 million shares of common stock at a strike price of $41.40 (expired January 17, 2017) related to this settlement were
 issued on September 30, 2009. The 5.0 million common shares are included in the basic outstanding shares. The warrants were not included in the diluted
 share count prior to 2015 because the strike price had historically been above the market price. In Q4 2016, full-year 2016, Q4 2015, full-year 2014, and
 full-year 2013, zero shares related to the warrants were included in the diluted share count due to antidilution based on the stock price. In full-year 2015,
 80,814 shares related to the warrants were included in the diluted share count using the treasury stock method.
 End Notes, con't.