<PAGE>

                                                                     Exhibit 4.1
                           KINDRED HEALTHCARE, INC.

                            2001 STOCK OPTION PLAN
                            ----------------------

 ARTICLE 1. PURPOSE

      The purpose of this 2001 Stock Option Plan is to advance the interest of
 Kindred Healthcare, Inc. ("Company") and its stockholders by encouraging
 employees who will largely be responsible for the long-term success and growth
 of the Company. The Plan also is intended to provide flexibility to the Company
 in attracting, retaining and motivating employees and promoting their efforts
 on behalf of the Company.

 ARTICLE 2. DEFINITIONS AND CONSTRUCTION

      2.1   Definitions. As used in the Plan, defined terms shall have the
 respective meanings provided by such definitions, and the terms set forth below
 shall have the following meanings:

      (a)   "Affiliate" shall mean any of the Company's direct or indirect
subsidiaries within the meaning of Section 424 of the Code.

      (b)   "Board" shall mean the Board of Directors of the Company.

      (c)   "Cause" shall mean, unless otherwise defined in an Option Agreement,
a felony conviction of a Participant or the failure of a Participant to contest
prosecution for a felony, or a Participant's willful misconduct or dishonesty,
any of which is determined by the Committee to be directly and materially
harmful to the business or reputation of the Company or its Subsidiaries.

      (d)   A "Change in Control" shall mean any of the following events:

            (i)   any Person (as this term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, but excluding any person described in and
satisfying the conditions of Rule 13d-1(b)(i) thereunder) (an "Acquiring
                                                               ---------
Person") becomes the "beneficial owner" (as such term is defined in Rule 13d-3
------
promulgated under the Exchange Act) (a "Beneficial Owner"), directly or
                                        ----------------
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities, other than
beneficial ownership by a Participant, the Company, any employee benefit plan of
the Company or any Person organized, appointed or established pursuant to the
terms of any such benefit plan;

            (ii)  the Company's stockholders approve an agreement to merge or
consolidate the Company with another corporation, or an agreement providing for
the sale of substantially all of the assets of the Company to one or more
Persons, in any case other than with or to an entity 50% or more of which is
controlled by, or is under common control with, the Company;

<PAGE>

          (iii)  during any two-year period, commencing after the effective date
of the Plan, individuals who at the date on which the period commences
constitute a majority of the Board of Directors (the "Incumbent Directors")
cease to constitute a majority thereof for any reason; provided, however, that a
                                                       --------  -------
director who was not an Incumbent Director shall be deemed to be an Incumbent
Director if such director was elected by, or on the recommendation of, at least
two-thirds of the Incumbent Directors (either actually or by prior operation of
this provision), other than any director who is so approved in connection with
any actual or threatened contest for election to positions on the Board of
Directors; or

          (iv)   the Company is merged, combined, consolidated, recapitalized or
otherwise organized with one or more other entities that are not Affiliates, as
a result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are, or will
be, owned, directly or indirectly, by shareholders of the Company, determined on
the basis of record ownership as of the date of determination of holders
entitled to vote on the transaction (or in the absence of a vote, the day
immediately prior to the event).

     (e)  "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.

     (f)  "Committee" shall mean the Executive Compensation Committee of the
Board of Directors or such other committee as the Board shall designate from
time to time.

     (g)  "Disability" shall mean a physical or mental condition that entitles
the Participant to benefits under the Company's long-term disability plan. For
purposes of this Plan, a Participant's employment shall be deemed to have been
terminated as a result of a Disability on the date as of which the Participant
is first entitled to receive disability benefits under such policy.

     (h)  "Employee" shall mean an individual who is a full-time employee of the
Company, a Subsidiary or a partnership or limited liability company in which the
Company or its Subsidiaries own a majority interest.

     (i)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

     (j)  "Fair Market Value" of the Shares shall mean, as of any applicable
date, the closing sale price of the Shares on the New York Stock Exchange,
NASDAQ, NASDAQ Bulletin Board or any national or regional stock exchange in
which the Shares are primarily traded, or if no such reported sale of the Shares
shall have occurred on such date, on the next preceding date on which there was
such a reported sale. If there shall be any material alteration in the present
system of reporting sale prices of the Shares, if the Shares shall no longer be
listed on the New York Stock Exchange, NASDAQ, NASDAQ Bulletin Board or a
national or regional stock exchange, or if the trading does not reflect an
accurate value, the Fair Market Value of the Shares as of a particular date
shall be determined by the Committee.

                                       2
<PAGE>

     (k)  "ISO" shall have the meaning given such term in Section 6.1.

     (l)  "NQSO" shall have the meaning given such term in Section 6.1.

     (m)  "Option" shall mean an option to purchase Shares granted pursuant to
the Plan.

     (n)  "Option Agreement" shall mean a written agreement between the Company
and a Participant evidencing the grant of an Option as described in Section 6.2.

     (o)  "Option Exercise Price" shall mean the purchase price per Share
subject to an Option, which shall not be less than the Fair Market Value of the
Share on the date of grant.

     (p)  "Option Spread" shall mean, with respect to an Option, the excess if
any, of the Fair Market Value of a Share as of the applicable valuation date
(e.g., the date the Option is exercised) over the Exercise Price.

     (q)  "Participant" shall mean any Employee selected by the Committee to
receive an Option under the Plan.

     (r)  "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).

     (s)  "Plan" shall mean this Kindred Healthcare, Inc. 2001 Stock Option Plan
as the same may be amended from time to time.

     (t)  "Retirement" shall mean retirement by a Participant in accordance with
the terms of the Company's retirement or pension plans.

     (u)  "Shares" shall mean the shares of the Company's common stock, par
value $.25 per share.

     (v)  "Subsidiary" shall mean, with respect to any company, any corporation
or other Person of whom a majority of its voting power, equity securities, or
equity interest is owned directly or indirectly by such company.

     2.2  Gender and Number. Except where otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.

     2.3  Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

                                       3
<PAGE>

ARTICLE 3. ADMINISTRATION

     3.1  The Committee. The Plan shall be administered by the Committee. The
Committee shall meet at such times and places as it determines and may meet
through a telephone conference call. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the Board.

     3.2  Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have full authority to:

          (a)  select Participants to whom Options are granted;

          (b)  determine the terms, conditions, size, types and frequency of
Options granted under the Plan;

          (c)  accelerate the exercisability of any Option, for any reason;

          (d)  construe and interpret the Plan and any agreement or instrument
entered into under the Plan;

          (e)  establish, amend and rescind rules and regulations for the Plan's
administration; and

          (f)  amend the terms and conditions of any outstanding Options to the
extent such terms and conditions are within the discretion of the Committee as
provided in the Plan.

     The Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. The Committee may delegate its
authority as identified hereunder; provided, however, that such delegation is
permitted by law and Rule 16b-3 promulgated under the Exchange Act and that such
delegation would not jeopardize compliance with the "outside directors"
requirements (or any other applicable requirement) under Section 162(m) of the
Code.

     3.3  Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive and binding upon all
persons, including the Company, its stockholders, Employees, Participants and
their estates and beneficiaries.

     3.4  Section 16 Compliance; Bifurcation of Plan. It is the intention of the
Company that the Plan and the administration of the Plan comply in all respects
with Section 16(b) of the Exchange Act and the rules and regulations promulgated
thereunder. If any Plan provision, or any aspect of the administration of the
Plan, is found not to be in compliance with Section 16(b) of the Exchange Act,
the provision or administration shall be deemed null and void, and in all events
the Plan shall be construed in favor of its meeting the requirements of Rule
16b-3 promulgated under the Exchange Act. Notwithstanding anything in the Plan
to the contrary, the

                                       4
<PAGE>

Board or the Committee, in its discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Participants who are subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other
Participants.

ARTICLE 4. SHARES AVAILABLE UNDER THE PLAN

     4.1  Number of Shares. Subject to adjustment as provided in Section 4.2,
the number of Shares reserved for issuance upon the exercise of Options is
800,000 Shares; and which, with respect to each Participant, will not exceed an
aggregate of 150,000 shares granted in any calendar year. Any Shares issued
under the Plan may consist, in whole or in part, of authorized and unissued
Shares or treasury Shares. If and to the extent an Option shall expire or
terminate for any reason without having been exercised in full (including a
cancellation and regrant of an Option), or shall be forfeited, the Shares
associated with such Option shall again become available for new Options under
the Plan.

     4.2  Adjustments in Authorized Shares and Outstanding Options. In the event
of a merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, property dividend, share repurchase, share combination,
share exchange, issuance of warrants, rights or debentures, or other change in
the corporate structure of the Company affecting the Shares, the Committee shall
in its absolute discretion, subject to any required action by the shareholders
of the Company, substitute or adjust the total number and class of Shares or
other stock or securities which may be issued under the Plan, and the number,
class and/or Exercise Price of Shares subject to outstanding Options, as it
determines to be appropriate and equitable to prevent dilution or enlargement of
the rights of Participants and to preserve, without exceeding, the value of any
outstanding Options; and further provided, that the number of Shares subject to
any Option shall always be a whole number. In the case of ISOs, such adjustments
shall be made in such a manner so as not to constitute a "modification" within
the meaning of Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

     All Employees are eligible to receive Options under the Plan. In selecting
Employees to receive Options under the Plan, as well as in determining the
number of Shares subject to, and the other terms and conditions applicable to,
each Option, the Committee shall take into consideration such factors as it
deems relevant in promoting the purposes of the Plan, including the duties of
the Employees, their present and potential contribution to the success of the
Company and their number of years of active service as employees.

ARTICLE 6. STOCK OPTIONS

     6.1  Grant of Options. Subject to the terms and provisions of the Plan, the
Committee may grant Options to Participants at any time and from time to time,
in the form of options which are intended to qualify as incentive stock options
within the meaning of Section 422 of the

                                       5
<PAGE>

Code ("ISOs"), Options which are not intended to so qualify ("NQSOs") or a
combination thereof. All ISOs must be granted within ten years from the date on
which the Plan was adopted by the Board, and may only be granted to employees of
the Company or any Affiliate.

     6.2  Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the Option Exercise Price, the duration of the
Option, the number of Shares to which the Option relates and such other
provisions as the Committee may determine or which are required by the Plan. The
Option Agreement shall also specify whether the Option is intended to be an ISO
or a NQSO and shall include such provisions applicable to the particular type of
Option granted.

     6.3  Duration of Options. Each Option shall expire at such time as is
determined by the Committee at the time of grant; provided, however, that no
Option shall be exercised later than the tenth anniversary of its grant.

     6.4  Exercise of Options. Options shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall approve at
the time of grant, which need not be the same for each grant or for each
Participant. Subject to other restrictions contained herein, the Committee may
accelerate the exercisability of any Option. Options shall be exercised, in
whole or in part, by delivery to the Company's principal office of a written
notice of exercise, to the attention of the Corporate Secretary, no less than
three (3) business days in advance of the effective date of the proposed
exercise (the "Exercise Date"), setting forth the number of Shares with respect
to which the Option is to be exercised, the Grant Date of the Option and the
Exercise Date and accompanied by full payment of the Option Exercise Price and
all applicable withholding taxes. Applicable withholding taxes shall be
calculated based on the Option Spread for each Share specified in the notice of
exercise as of the Exercise Date.

     6.5  Payment of Option Exercise Price. The Option Exercise Price for Shares
as to which an Option, or portion thereof, is exercised shall be paid to the
Company in full at the time of exercise either (a) in cash or other cash
equivalent acceptable to the Company, (b) by tendering Shares, if permitted by
the Committee, having a Fair Market Value (determined as of the close of the
business day immediately preceding the day on which the Option is exercised)
equal to the Option Exercise Price or (c) a combination of (a) and (b) or any
other reasonable consideration that the Committee may deem appropriate.

     6.6  Acceleration Upon Change in Control. Upon a Change in Control, any
then outstanding Options held by Participants shall become immediately
exercisable. Furthermore, if provided in an Option Agreement, the Participant
shall have the right to sell the Option back to the Company for an amount
generally equal to the Option Spread.

     6.7  Termination of Employment. If the employment of a Participant is
terminated for Cause, all then outstanding Options of such Participant, whether
or not exercisable, shall terminate immediately. If the employment of a
Participant is terminated for any reason other than for Cause, death, Disability
or Retirement, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by such Participant or such

                                       6
<PAGE>

Participant's personal representative at any time prior to the expiration date
of the Options or within 90 days after the date of such termination of
employment, whichever is earlier. In the event of the Retirement of a
Participant, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by the Participant (a) in the case of
NQSOs, within two years after the date of Retirement and (b) in the case of
ISOs, within 90 days after Retirement; provided, however, that no such Options
may be exercised on a date subsequent to their expiration. In the event of the
death or Disability of a Participant while employed by the Company or a
Subsidiary, all then outstanding Options of such Participant shall become
immediately exercisable, and may be exercised at any time (a) in the case of
NQSOs, within two years after the date of death or determination of Disability
and (b) in the case of ISOs, within one year after the date of death or
determination of Disability; provided, however, that no such Options may be
exercised on a date subsequent to their expiration. In the event of the death of
a Participant, the Option may be exercised by the person or persons to whom
rights pass by will or by the laws of descent and distribution, or if
appropriate, the legal representative of the deceased Participant's estate. In
the event of the Disability of a Participant, Options may be exercised by the
Participant, or if such Participant is incapable of exercising the Options, by
such Participant's legal representative.

     6.8  Restrictions on Transferability of Options. During the lifetime of the
Participant, each Option shall be exercisable only by the Participant and are
non-transferable and will not be subject in any manner to sale, transfer,
alienation, pledge, encumbrance or charge. Upon the death of the Participant,
such Participant's Options shall be transferable to his beneficiaries or his
estate ("Permitted Transferee"). Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of the Plan (excluding
Section 6.7) the term "Optionee" shall be deemed to refer to the Permitted
Transferee. Notwithstanding the above, the provisions of Section 6.7 concerning
the termination of an Option shall continue to be applied with respect to the
original Optionee. Any transferred Option shall be exercisable by the Permitted
Transferee only to the extent, and for the periods, specified in the Option
Agreement or this Plan. In the event of any purported transfer of any Options in
violation of the provisions of the Plan, such purported transfer shall, to the
extent permitted by applicable law, be void and of no effect.

     6.9  Certificate Legend. For any Shares issued upon exercise of an ISO, the
Company may legend such Shares as it deems appropriate.

ARTICLE 7. AMENDMENT, MODIFICATION AND TERMINATION

     7.1  Effective Date. The Plan shall become effective upon adoption by the
Board.

     7.2  Termination Date. The Plan shall terminate on the earliest to occur of
(1) the tenth anniversary of the adoption of the Plan by the Board, (2) the date
when all Shares available under the Plan shall have been acquired pursuant to
the exercise of Options or (3) such other date as the Board may determine in
accordance with Section 7.3.

                                       7
<PAGE>

     7.3  Amendment, Modification and Termination. The Board may, at any time in
its absolute discretion, amend, modify or terminate the Plan. Without the
approval of the stockholders of the Company (as may be required by the Code,
Section 16 of the Exchange Act and the rules promulgated thereunder, any
national securities exchange or system on which the Shares are then listed or
reported or a regulatory body having jurisdiction with respect hereto), however,
no such amendment, modification or termination may:

     (a)  materially increase the benefits accruing to Participants under the
Plan;

     (b)  increase the total amount of Shares which may be issued under the
Plan, except as provided in Section 4.2; or

     (c)  materially modify the class of Employees eligible to participate in
the Plan.

     7.4  Awards Previously Granted. No amendment, modification or termination
of the Plan shall in any manner adversely affect any outstanding Option without
the written consent of the Participant holding such Option. Notwithstanding the
foregoing, however, the Company may terminate any outstanding Options, in which
case the Company, in full consideration for such termination, shall pay with
respect to any Option, or portion thereof, so terminated, an amount equal to the
Black-Scholes value of such Option, or portion thereof, determined based on the
assumptions used for purposes of the Company's then most recent proxy statement
or, if not so used based on assumptions determined by the Committee. Such
payment shall be made as soon as practicable after the payment amounts are
determined.

ARTICLE 8. NO GRANTING OF EMPLOYMENT RIGHTS

     Neither the Plan, nor any action taken under the Plan, shall be construed
as giving any Employee the right to become a Participant, nor shall an Option
under the Plan be construed as giving a Participant any right with respect to
continued employment with the Company. The Company expressly reserves the right
to terminate, whether by dismissal, discharge or otherwise, a Participant's
employment at any time, with or without Cause, except as may otherwise be
provided by any written agreement between the Company and the Participant.

ARTICLE 9. WITHHOLDING

     A Participant shall remit to the Company, as described in Section 6.4
hereof, an amount sufficient to satisfy federal, state and local taxes or any
other withholdings required by law to be withheld with respect to any grant,
exercise or payment made under or as a result of the Plan.

ARTICLE 10. INDEMNIFICATION

     No member of the Board or the Committee, nor any officer or Employee acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,
and all members of the Board, the Committee and each officer or Employee of the
Company acting on their behalf shall, to the

                                       8
<PAGE>

extent permitted by law, be fully indemnified and protected by the Company with
respect to any such action, determination or interpretation.

ARTICLE 11. SUCCESSORS

     All obligations of the Company with respect to Options granted under the
Plan shall be binding on any successor to the Company, whether the existence of
such successor is a result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of the Company.

ARTICLE 12. GOVERNING LAW

     To the extent not preempted by federal law, the Plan, and all agreements
under the Plan, shall be governed by, and construed in accordance with, the laws
of the State of Delaware without regard to its conflict of laws rules.
Furthermore, the Plan and all Option Agreements relating to ISOs shall be
interpreted so as to qualify as incentive stock options under the Code.

     IN WITNESS WHEREOF, this Kindred Healthcare, Inc. 2001 Stock Option Plan
has been executed by the Company as of the 21st day of May, 2001, being the date
the Plan was adopted by the Board.


                                     KINDRED HEALTHCARE, INC.



                                     By: /s/ Edward L. Kuntz
                                         -------------------
                                         Edward L. Kuntz, Chairman, Chief
                                           Executive Officer and President

                                       9