April 6, 2000

Mr. John F. Heller
Executive Vice President
  of Facility Operations
Integrated Health Services, Inc.
910 Ridgebrook Road
Sparks, MD 21152

Re:      Amendment to Employment  Agreement between  Integrated Health Services,
         Inc. and John F. Heller

Dear John:

         This letter agreement  amends and supplements the employment  agreement
dated  July 1, 1998 (the  "Employment  Agreement")  between  you and  Integrated
Health Services,  Inc.  ("IHS").  Unless otherwise  defined in this letter,  all
capitalized  terms  used  have  the  meaning  given  to them  in the  Employment
Agreement.  To the extent of any inconsistency between your employment agreement
and this letter, the terms of this letter agreement will control.

1.       SALARY & INITIAL BONUS

         A.       Base Salary

         Effective October 1, 1999 your annual base salary is $400,000.

         B.       Initial Bonus

         In recognition of your past  contributions  to IHS, your release of all
claims you may have  against  IHS  through  the date of this  agreement,  and to
induce you to enter into this agreement, upon execution of this letter, IHS will
pay you an initial bonus (the "Initial  Bonus") of $250,000.  This is a one-time
bonus that IHS will not include in any other  calculation  under your Employment
Agreement.



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2.       BONUS PROGRAMS

         A.       Retention Bonus

         IHS intends to adopt a Retention  Bonus  Program.  After the program is
adopted,  you will participate in the Program until the earlier of: (i) the date
IHS cancels the  Retention  Bonus  Program or (ii) you are no longer a full time
IHS  employee.  Pursuant  to the  Retention  Bonus  Program,  IHS  will  pay you
quarterly  retention bonuses in such amounts as shall be determined by the Chief
Executive Officer;  provided,  however,  that, if the Retention Bonus Program is
adopted your Retention  Bonus for the fiscal year beginning  October 1, 1999 (on
an annualized  basis) will be no less than $375,000,  payable in equal quarterly
installments in arrears, beginning on January 1, 2000. The Retention Bonus is in
addition to the Performance Bonus referred to below.

         B.       Performance Bonus

         IHS has cancelled to discretionary  bonus referred to in Paragraph 2.2.
of the Employment  Agreement.  Instead of the discretionary bonus referred to in
Paragraph 2.2 of the Employment Agreement,  IHS will pay you a non-discretionary
annual  performance  bonus (the "Annual Bonus") based on the achievement by your
division of the performance goals (the "Performance  Goals")  established by the
Chief Executive Officer for each year (or portion  thereof),  which will include
targets  related  to the  earnings  before  interest,  taxes,  depreciation  and
amortization  ("EBITDA")  of IHS. The Chief  Executive  Officer  will  establish
objective  criteria to be used to determine the extent to which the  Performance
Goals have been satisfied;  provided, however, if your division meets or exceeds
the year 2000 Performance Goals your Annual Bonus will be no less than $200,000.

3.       PARTICIPATION IN MANAGEMENT WELFARE PLANS

         IHS has  cancelled  the SERP  referred  to in  Paragraph  2.3(f) of the
Employment Agreement.  In consideration of your release and waiver of any claims
you may have  against IHS  relating to IHS'  failure to continue  the SERP,  IHS
promises that during your employment, you will be entitled to participate in all
benefit plans and programs  established  or maintained by IHS for the benefit of
its  Executive  Vice  Presidents  including,  without  limitation,  all pension,
retirement, savings, stock option and other employee benefit plans and programs.
No similarly  situated  Executive Vice President will receive a greater  benefit
under any benefit  plans and programs  established  or maintained by IHS for the
benefit of its Executive Vice Presidents.

4.       OPTIONS AND EQUITY OWNERSHIP

         IHS has cancelled the Employee Loan Plan. Instead, provided (a) you are
still a full time IHS  employee  and (b) your  division  has met or exceeded the
Performance  Goals for the calendar  year 2000,  IHS agrees  that,  on or before
March 1, 2001, it will review your equity  ownership  position in IHS and design
(or include you in) a plan that will, to the maximum  extent allowed by Delaware
law, ameliorate, the dilutive effect of recent events on your ownership position
in IHS.  Specifically,  if you are still  employed by IHS on March 1, 2001,  IHS
will make a good faith effort to implement a

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stock ownership  program (e.g., a stock option program or a stock-loan  purchase
program)  that will permit you to acquire an equity  position in IHS  consistent
with that of similarly  experienced and similarly  situated senior management in
the nursing home industry.  No similarly  situated Executive Vice President will
receive  a  greater  benefit  under  any stock  ownership  plan  established  or
maintained by IHS for the benefit of its Executive Vice Presidents.

5.       TERMINATION FOR GOOD REASON

         The  definition  of "Good  Reason" set forth in  Paragraph  3.2 of your
         Employment Agreement shall be supplemented as follows:

         "Good Reason" shall also include the occurrence of any of the following
         without your express written consent:

         (1)      the  assignment to you of any duties  materially  inconsistent
         with your current  position,  duties,  responsibilities  or status with
         IHS;

         (2)      a material  change in your reporting  responsibilities  (i.e.,
         reporting to anyone other than Dr. Robert Elkins);

         (3)      the failure by IHS to include you in any compensation  plan or
         benefit plan provided by IHS to any of its Executive Vice Presidents;

         (4)      the  occurrence  of any event which would  constitute  a "Good
         Reason" or a "Change of  Control"  under the  employment  agreement  of
         IHS's Chief Executive Officer or President; or

         (5)      the failure of the IHS to obtain (and deliver to you) promptly
         after any Change in Control an agreement to assume and agree to perform
         this  Agreement;  provided,  further,  that in  addition  to any rights
         accruing  because of the successor's  failure to assume your employment
         agreement,  a  successor's  failure to assume  this  Agreement  after a
         Change of Control  shall  release you from all  obligations  related to
         your  employment  by IHS  including  but not  limited to all  covenants
         against competition contained in any agreement between you and IHS.

6.       SEVERANCE

         Paragraphs  3.4  (a),  (b)  and (c) of your  Employment  Agreement  are
deleted. Instead, if you resign for Good Reason or are terminated without cause:

(i)      You are released from all obligations related to your employment.  This
         release  includes but is not limited to your  obligation to repay those
         advances made to you  conditioned  on your  acquiring or maintaining an
         equity  position in IHS pursuant to the 1999  Employee  Loan Program or
         any successor program established referred to in Paragraph 4 hereof.


<PAGE>

(2)      Within fifteen days of your termination,  IHS will make a one-time lump
         sum  severance  payment  equal to your  preceding  twelve (12)  months'
         compensation.

Your severance is deemed "earned" on the day after you resign for Good Reason or
you receive a notice of termination.  All payments  hereunder will be subject to
any  required  withholding  of Federal,  state and local  taxes  pursuant to any
applicable law or regulation.

7.       DEFINITION OF "CAUSE"

         The  definition  of "Cause" in Paragraph 3.2 shall be  supplemented  by
         adding as "(v)":

         Executive will, at any time after the date of this Agreement, disparage
         IHS, any of its subsidiaries,  or any of their shareholders,  directors
         or officers.

IHS appreciates your continued loyalty and dedication.  Please  memorialize your
acceptance of these changes to the Employment Agreement by signing and returning
one copy of this letter to me.

Sincerely,



Robert N. Elkins
President & CEO

I have  reviewed  and  understand  this letter and have had the  opportunity  to
review  this  letter  with my  attorneys.  I accept the changes to the terms and
conditions of my employment contained in this letter.


-------------------------
John F. Heller