Annual Quality Report 2006Kindred Healthcare Health Services Division

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At Kindred Healthcare, our management philosophy is simple – focus on our people, on quality and customer service, and our business results will follow.

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www.kindredhealthcare.com

Table of Contents

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About Kindred Healthcare and Our Mission Kindred Healthcare’s Special Programs AHCA National Quality Awards Annual State Surveys Customer Satisfaction Employee Satisfaction Quality First Pledge Code of Conduct 2006 Survey Results for All Kindred Nursing Centers (online only)

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Our MissionKindred Healthcare will be the nation’s leading provider of skilled nursing, rehabilitation and long-term acute care hospital services. We will set the standard for professional excellence by creating value for our residents, patients, employees and shareholders. “Our goal is to become the most trusted and respected provider of healthcare services in every community we serve.” – Paul Diaz, President and CEO

About Kindred HealthcareKindred Healthcare, Inc. (NYSE: KND), is a Fortune 500 healthcare services company, based in Louisville, Kentucky, with annualized revenues of $4.3 billion that provides services in over 500 locations in 39 states. Kindred through its subsidiaries operates long-term acute care hospitals, skilled nursing centers, institutional pharmacies and a contract rehabilitation services business, Peoplefirst Rehabilitation Services, across the United States. Kindred’s 56,000 employees are committed to providing high-quality patient care and outstanding customer service to become the most trusted and respected provider of healthcare services in every community we serve. For more information, go to www.kindredhealthcare.com.

Health Services DivisionThe Health Services Division consists of 242 skilled nursing centers in 28 states providing quality care to approximately 26,000 residents. These nursing centers provide a full range of medical services to treat the residents who live with us and the patients who come to our facilities for short-term, episodic medical or rehabilitative care.

Hospital DivisionThe Hospital Division consists of 81 long-term acute care hospitals in 24 states providing care to medically complex patients who require prolonged treatment plans and extended recovery time. These patients have serious medical conditions best treated by a physician-directed interdisciplinary team of healthcare professionals, including respiratory therapists, nurses, pharmacists, physical therapists, occupational therapists and dietitians.

Peoplefirst RehabilitationPeoplefirst Rehabilitation staffs and manages the rehabilitation departments in our hospitals and nursing centers in addition to non-Kindred facilities. These contract therapy services include physical, occupational and speech therapies. Our therapists incorporate leading-edge technology into comprehensive treatment plans which help our patients attain and sustain their highest functional ability to return home.

About Kindred Healthcare and Our Mission

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One of the ways Kindred has stayed at the forefront of long-term care is through the development and implementation of special programs designed to address the very specific needs of our medically complex resident population. Recognizing that different approaches are needed to deal with different health problems, Kindred continues to play an active role in the evolution of specialized care programs to maximize the abilities of each person in our care.

Specialized Alzheimer’s CareOur nursing centers provide care to approximately 26,000 medically complex residents daily. Because experts estimate that as many as two-thirds of nursing home residents have some sort of dementia, many of our nursing centers have separate Reflections™ units run by teams of professionals who specialize in the unique problems experienced by residents suffering from Alzheimer’s disease and dementia.

Kindred Healthcare is committed to taking care of residents with Alzheimer’s disease. We provide specialized programs in a secured environment at a number of our nursing centers nationwide.

The Reflections Communities Our Reflections™ Communities are designed for residents with mild to moderate cognitive impairments, such as the early to middle stages of Alzheimer’s disease. Kindred Healthcare has developed a signature program, called ColorScapes®, that is designed to support the resident’s range of ability rather than disability. This program embraces the principles of the Best Friends Approach and Habilitation Model as recommended by the Alzheimer’s Association. The Reflections Community provides a protective and comfortable environment. Specialized programming and care approaches are designed to create personal successes for each resident. This model of care helps the resident to experience positive emotions, and reduces feelings of confusion, fear and agitation. Staff members are trained to recognize the special needs of those with Alzheimer’s and related dementias. Because Alzheimer’s disease is progressive and irreversible, the therapeutic environment is supportive rather than curative.

The Passages CommunitiesOur Passages® Communities are intended to assist residents with moderate to severe cognitive impairments or middle-to advanced-stage dementia. The Passages Community embraces the same principles as the Reflections Community. The approach to care and specialized activity programming is altered to meet the changing needs of the resident progressing into the middle to advanced stages of dementia.

Kindred Healthcare’s Special Programs

RehabilitationOur nursing centers provide intensive rehabilitation services on an inpatient and outpatient basis by therapists from Peoplefirst, our rehabilitation division. Rehab therapies, including physical, occupational and speech, can help residents recovering from a stroke, a cardiac or respiratory event, orthopedic surgery such as back surgery, or replacement of the hip or knee. Many of our facilities have distinct transitional care units (TCUs) providing transitional or subacute care that emphasize functional independence, helping patients return home as soon as possible.

Peoplefirst has also developed a proprietary nationwide clinical tracking system that allows us to track patient outcomes, provide quality assurance, identify industry trends, streamline invoicing and manage reporting. We also assist our rehab partners with

reimbursement issues, HIPAA implementation, regulatory compliance and clinical issues. We continually provide our therapists with formal training and implement best practices to improve the quality of our programs.

In addition to the traditional therapies noted earlier, our comprehensive rehabilitation programs also include:• wound care • pain management • continence improvement • falls prevention • dementia management

Orthopedic Conditions

Neurological Conditions

Stroke

Amputations

Pulmonary/Cardiac

Percentage of Improvement in Functional Abilities – Evaluation to Discharge

56%

35.8%

38.1%

40.1%

35.7%

Rehabilitation Therapy Success

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Angel CareThe Angel Care program is an important piece of the foundation for delivering quality service and demonstrates integrity with honest communication. The Angel Care program is designed to address any special needs that may arise during a resident’s stay in our facilities. This one-on-one program focuses extra attention on residents and, in some cases, their family members.

Upon admission to one of our nursing centers, a resident is paired with an angel, an involved and dedicated employee within the center. The angel and the resident will begin to communicate on a regular basis. The angel makes regular visits to check on the well-being of the resident. During meetings, the angel discusses any concerns regarding medical needs, facility programs or dietary issues. The angel also communicates with family members on a regular basis.

This program ensures that we are meeting or exceeding the level of care and customer service that our residents and their family members expect. It also helps to assure our residents and their family members of our commitment to the quality of life of our residents.

Above and BeyondKindred employees take pride in providing exceptional care and customer service to everyone we have the privilege to serve. It is every staff member’s responsibility to deliver customer service that is above and beyond his or her ordinary job duties.

The staff members of all Kindred nursing centers are eligible to participate in our Above and Beyond program. This program recognizes and awards employees who have gone above and beyond their job’s duties to provide exceptional customer service.

Any resident, patient, family member, visitor, employee or other customer of the centers may nominate an employee for this award. An award recipient is selected for each healthcare center and each district every month. Annually, one employee is recognized for the region’s Above and Beyond employee and one deserving employee will be chosen and recognized as the division’s Above and Beyond employee of the year.

Falling StarsSince the residents of our nursing homes are at risk for experiencing falls, we have a Falling Stars program to reduce falls and their impact. Our caregivers review specific patterns, situations and behaviors associated with falls. And our Falling Stars symbol on a resident’s door alerts staff about who is at risk for falls.

A risk assessment for falls is completed upon a resident’s admission and updated quarterly. Any resident who has fallen in the interim is identified by the Falling Stars symbol to alert caregivers. In assessing the best approach to reduce the risk for falls, we strive to achieve a balance of the resident’s independence, freedom of movement, dignity and safety.

We use a team approach to monitor and supervise resident care and falls reduction. Team members may include a physical therapist, nurse, social worker, or activities director and family member. Work-ing together, with clear ways of communicating, is an effective way to reduce falls and the accompanying trauma.

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Kindred’s Award Recipients are listed below, organized by year, and listed in alphabetical order by state.

2006 Step I RecipientsCalifornia

Foothill Nursing and Rehabilitation Center, Glendora

La Veta Healthcare Center, Orange

Indiana

Regency Place of Greenwood, Greenwood

Sellersburg Health and Rehabilitation Centre, Sellersburg

Kentucky

Harrodsburg Health Care Center, Harrodsburg

Hillcrest Health Care Center, Owensboro

Woodland Terrace Health Care Facility, Elizabethtown

Maine

Brewer Rehab and Living Center, Brewer

Massachusetts

Country Rehabilitation and Nursing Center, Newburyport

Hallmark Nursing and Rehabilitation Center, New Bedford

Harrington House Nursing and Rehabilitation Center, Walpole

Missouri

Ozark Mountain Regional Healthcare Center, Crane

Tablerock Healthcare, Kimberling City

North Carolina

Cypress Pointe Rehabilitation and Health Care Centre, Wilmington

Guardian Care of Zebulon, Zebulon

Ohio

Chillicothe Nursing and Rehabilitation Center, Chillicothe

Franklin Woods Nursing and Rehabilitation Center, Columbus

West Lafayette Rehabilitation and Nursing Center, West Lafayette

Winchester Place Nursing and Rehabilitation Center, Canal Winchester

Pennsylvania

Wyomissing Nursing and Rehabilitation Center, Reading

Rhode Island

Kindred Heights Nursing and Rehabilitation Center, East Providence

Tennessee

Pine Meadows Healthcare and Rehabilitation Center, Bolivar

Ripley Healthcare and Rehabilitation Center, Ripley

Utah

Holladay Healthcare Center, Salt Lake City

Wasatch Valley Rehabilitation, Salt Lake City

Wisconsin

Eastview Medical and Rehabilitation Center, Antigo

Kennedy Park Medical and Rehabilitation Center, Schofield

Vallhaven Care Center, Neenah

2005 Step II RecipientsMassachusetts

Clark House Nursing Center at Fox Hill Village, Westwood

Newton and Wellesley Alzheimer Center, Wellesley

2005 Step I RecipientsArizona

Desert Life Rehabilitation and Care Center, Tucson

Villa Campana Health Care Center, Tucson

California

Lawton Healthcare Center, San Francisco

Idaho

Mountain Valley Care and Rehabilitation Center, Kellogg

Indiana

Bremen Health Care Center, Bremen

Harrison Health and Rehabilitation Centre, Corydon

Regency Place of Fort Wayne, Fort Wayne

Royal Oaks Health Care and Rehabilitation Center, Terre Haute

Massachusetts

Blue Hills Alzheimer’s Care Center, Stoughton

Nevada

Torrey Pines Care Center, Las Vegas

North Carolina

Guardian Care of Henderson, Henderson

Ohio

Lebanon Country Manor, Lebanon

Minerva Park Nursing and Rehabilitation Center, Columbus

Whitehouse Country Manor, Whitehouse

Oregon

Medford Rehabilitation and Healthcare Center, Medford

Tennessee

Masters Health Care Center, Algood

Washington

Lakewood Healthcare Center, Lakewood

Rainier Vista Care Center, Puyallup

Wisconsin

Mount Carmel Medical and Rehabilitation Center, Burlington

2004 Step I RecipientsArizona

Kachina Point Health Care and Rehabilitation Center, Sedona

California

Bay View Nursing and Rehabilitation Center, Alameda

Nineteenth Avenue Healthcare Center, San Francisco

Idaho

Canyon West Health and Rehabilitation Center

(formerly Cascade Rehabilitation and Care Center), Caldwell

Indiana

Columbus Health and Rehabilitation Center, Columbus

Regency Place of South Bend, South Bend

Wildwood Health Care Center, Indianapolis

Kentucky

Maple Manor Health Care Center, Greenville

Massachusetts

Clark House Nursing Center at Fox Hill Village, Westwood

Newton and Wellesley Alzheimer Center, Wellesley

New Hampshire

Greenbriar Terrace Healthcare, Nashua

Ohio

Community Healthcare Center, Marion

Logan Health Care Center, Logan

Newark Healthcare Centre, Newark

Rhode Island

Oak Hill Nursing and Rehabilitation Center, Pawtucket

Tennessee

Loudon Healthcare Center, Loudon

Washington

Queen Anne Healthcare, Seattle

2003 Step I RecipientsCalifornia

Golden Gate Healthcare Center, San Francisco

Victorian Healthcare Center, San Francisco

AHCA National Quality AwardsThe American Health Care Association (AHCA) Quality Award is a distinction given to AHCA-member facilities for applying continuous quality improvement principles. By following the series of developmental steps that make up the award process, facilities gain knowledge and skills to help them better serve their customers and, in doing so, position themselves in an increasingly competitive environment. The AHCA Quality Award is modeled after criteria from the Malcolm

Baldrige National Quality Award, which is the nation’s premier recognition for quality achievement.

In 2006, Kindred earned the largest number of Step I Quality Awards of any company in the country for the third year in a row. For more information about the AHCA Quality Award, go to www.ahca.org/quality/awardinfo.htm.

FY 2006 ACCOMPLISHMENTS AMERICAN HEALTH CARE ASSOCIATION QUALITY AWARDS - 2003 TO 2006*

*Largest Multi-Facility Companies

Kindred Centers Have Earned 66 Step I Awards and 2 Step II Awards

Kindred

Company B

Company C

Company D

Company E

Company F

0 10 20 30 40 50 60 70

68

37

30

18

13

9

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During annual inspection surveys, the State looks at many aspects of quality in nursing centers by observing resident care processes, staff/resident interaction and environment. The inspectors interview residents, family members, caregivers and administrative staff, and review clinical records.

The inspection team consists of trained inspectors, including at least one registered nurse. This team evaluates whether the nursing home meets individual resident needs. When an inspection team finds that a home does not meet a specific regulation, it issues a deficiency citation.

The regulations cover a wide range of aspects of resident life, from specifying standards for the safe storage and preparation of food to protecting residents from physical or mental abuse or inadequate care practices. There are over 150 regulatory standards that nursing homes must meet at all times.

Kindred nursing centers continue to make progress in improving quality, which is reflected in our regulatory compliance out-comes. As can be seen in the charts here, the number of deficien-cies issued to our nursing centers continues to decline, and the centers receiving deficiency-free surveys is steadily rising.

One significant marker of improvement is the reduction in what the regulators consider the more serious issues – those that may cause harm or are widespread. Kindred nursing centers as a group are now better than the industry as noted in the “Higher Scope and Severity” and “Substandard Quality of Care” charts below.

For more detailed information on state survey results for each of our nursing centers, please visit our website at www. kindredhealthcare.com or The Centers for Medicare and Medicaid Services (CMS) Nursing Home Compare website at www.medicare.gov/NHCompare.*

Annual State Surveys

* This survey information is based on surveys that were completed within the last 18 months. Significant improvements can made within such an extended time frame.

Online Survey, Certification and Reporting DATA (OSCAR) Each data point represents the most recent Standard Survey for all Centers in Kindred (n = 249), Nation (n = 15,899)

Regulatory ComplianceIt is important to note that nursing centers are one of the more regulated entities in the nation, inspected by both state and federal surveyors. Below is a sampling of the many areas monitored by the survey process.

• resident rights• admission, transfer and discharge rights• resident behavior and facility practices• quality of life• resident assessment• quality of care• nursing services• dietary services• physician services• specialized rehabilitative services• dental services• pharmacy services• infection control• physical environment• administration

Portfolio as of dates shown

HSD IMPROVED SURVEY PERFORMANCE

30%

25%

20%

15%

Kindred (42.9% relative improvement)

Nation ( – 7.2% relative deterioration)

Improvement in % of Annual Surveys with Higher Scope and Severity Tags

20062001

28.9%

20.7%

22.2%

16.5%

Kindred (66.2% relative improvement)

Nation (13.9% relative improvement)

20062001

Improvement in % of Annual Surveys with Substandard Quality of Care Tag

8%

6%

4%

2%

0%

7.1%

2.4%

3.1%3.6%

Kindred (3.5% relative improvement)

Nation ( – 38.8% relative deterioration)

Improvement in % of Deficiency-Free Annual Surveys

14%

12%

10%

8%

6%

4%

20062001

8.5%

13.4%

8.2%

8.8%

Kindred Quality Indicators Relative Improvement

35%

30%

25%

20%

15%

10%

5%

0%Dec. 2006

Dec. 2002

Pressure Ulcers in Low-Risk ResidentsPhysical Restraint UseWeight LossPressure Ulcers in High-Risk Residents

30.3%

25.3%24.4%

19.6%

Percent of Standard Surveys in which any health tag was cited at a Scope and Severity of F and above excluding G.

The three categories are Quality of Care, Quality of Life and Resident Behavior and Facility Practices

Online Survey, Certification and Reporting DATA (OSCAR) Each data point represents the most recent Standard Survey for all Centers in Kindred (n = 249), Nation (n = 15,899)

Percent of Standard Surveys that were Deficiency-Free

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MDS QUALITY INDICATORS AS OF DECEMBER 2006

Customer SatisfactionAs part of the Long-Term Care Alliance, a group of nursing home companies that work together to make improvements in the industry, Kindred conducted a resident and family satisfaction survey using an independent third party. This survey measured overall satisfaction, quality of life, quality of care, and quality of service.

Of those surveyed, 80% said there was a “good” or “excellent” chance they would recommend Kindred to others needing similar care.

Quality of RN/LVN/LPN care

Quality of rehabilitation therapy

Quality of CNA care

Staff competency

Respectfulness of staff

Percentage rating Kindred as “good” or “excellent”

87%

80%

78%

83%

89%

Incidence of New Fractures

Nation Kindred

2.1%

1.8%

2.5%

2%

1.5%

1%

.5%

0%

Prevelance of Pressure Ulcer in High-Risk Patients

Nation Kindred

16%

14%

12%

10%

8%

6%

4%

2%

0%

Prevelance of Physical Restraints

Nation Kindred

6%

5.6%6%

5%

4%

3%

2%

1%

0%

Prevelance of Pressure Ulcer in Low-Risk Patients

Nation Kindred

4%

3%

2%

1%

0%

14.1%13%

3%

2.3%

Employee SatisfactionOne of the most important factors in determining the quality of care provided at our nursing centers is the quality of our staff. When our employees are fulfilled, they are more likely to stay with the company longer. This consistency provides our residents with a level of familiarity and stability that lends to the homelike setting we attempt to emulate in our centers.

A significant consideration in our quality improvement initiative is turnover of employees. The long-term care industry’s employee turnover rates are higher than other healthcare venues and this does indeed impact continuity of services. At Kindred Healthcare, reducing employee turnover is a major goal and steady progress is being made as noted in the turnover chart below. Since 2000, we have reduced the total employee turnover in our nursing centers from 104.5% to 63.1%.

Because we know that reducing leadership turnover leads to lower overall turnover, we pay special attention to nuturing the relationships with center management teams. Kindred Directors of Nursing Services (DNS) turnover has dropped from 47.5% to 27.4% since 2002. This improvement contributes to improved operating efficiency and consistency of nurse staffing and reduces our staffing agency utilization and costs.

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Kindred Nursing Center Employee Turnover

Employee TurnoverDirector of Nursing Services Turnover

110%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%2000

9

2003

104.5%

2001

93.8%

77.5%

2004

74.2%

2005

64.7%

2002

87.2%

47.5%

2006

27.4%

63.1%

Quality Through PeopleIn an effort to reduce turnover year after year, we invest in our employees through a number of ways, including:

• 401(k)• healthcare benefits• wellness initiative• consistent center-based orientation• ongoing training• continual physical plant

improvement• tuition reimbursement for

continuing education• employee activities

“ Many of our nurses and dietary staff have been with me for over 15 years as well as several CNAs. Longevity is a key factor in our success.”

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– Agnes Langan, Director of Nursing Services, Newton and Wellesley Alzheimer Center, Wellesley, Massachusetts, has served the company for 33 years.

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Quality First PledgeIn July 2002, as part of a broader initiative to improve the quality of nursing home care in the United States, Kindred Healthcare, along with its peer companies and representatives of the two major long-term care trade associations, entered into the Quality First Pledge and Code of Conduct.

Based on seven principles, the Quality First Pledge and Code of Conduct outline specific and measurable steps that companies must take to improve quality outcomes in nursing facilities over time. As Quality First Pledge signatories, companies must commit to implementing each element of the Pledge and must continuously work toward achieving or improving upon the elements laid out in the Code of Conduct.

In complying with the principles of the Pledge, Kindred has committed to making information about our quality outcomes available to the public, in the belief that a better-informed public will make better decisions about long-term care services and provide a market-driven incentive to quality care. This first annual report represents Kindred’s commitment to that principle.

Quality First: A Pledge to Improve Quality Through Accountability, Compassion and LeadershipAs providers of long-term and short-term skilled nursing care, we recognize our unique obligations to the individuals we serve. Through dedicated care staff, we care for a vulnerable population that, in many cases, is frail and poor and whose care is often paid in part by government-funded programs. Because of the nature of the care we provide and the people we serve as well as the government resources available, we have different obligations than other healthcare providers. Providing care to vulnerable individuals requires more than clinical expertise; it requires us to attend to the emotional, spiritual, social, psychological and physical needs of our patients. To succeed in that mission, and to engender the trust of the American people, we hereby embrace a single set of voluntary principles beyond those required by law to guide our company now and in the future. By articulating the principles contained in this covenant, we pledge our commitment to the people we serve, and we agree to lead our company in ways that benefit the frail and vulnerable, our employees, and society as a whole.

Our Quality Commitment1. We are committed to making patient health and well-

being paramount priorities in our organization’s management. We also are committed to a philosophy of management that stimulates continuous quality improvement through the establishment of uniform quality measures, the creation of annual quality improvement goals, and the identification and use of clinical “best practices” in an effort to achieve appropriate patient outcomes.

2. We are committed to continuing to disclose information on quality to patients, employees, and the public, and we will assist them in accessing this information in a timely manner, while protecting confidentiality and complying with other legal requirements.

3. We are committed to clearly articulating and honoring patient and family rights, and working to ensure that our employees understand and uphold those rights.

4. We are committed to enhancing the human potential of our employees through education and training programs that strive to improve the quality of care delivered, and we are committed to sensitizing our staff to the special needs of frail and vulnerable patients.

5. We are committed to seeking the input of consumers as we work to improve quality, and we will work with others – in the private and public sectors – to identify, understand and, ultimately, to resolve concerns associated with care practices or patient outcomes.

6. We are committed to developing and implementing organization-specific programs that promote ethical and lawful conduct, and we will lead in the development of responsible laws, regulations, and other standards supporting the quality of care in the facilities we manage.

Code of ConductKindred requires all employees to perform their job responsibili-ties in an ethical manner and in accordance with applicable laws. To that end, Kindred’s Compliance Program is designed to promote the ethical and legal conduct of employees at all levels. When employees begin working at Kindred, they are asked to review and sign Kindred’s Code of Conduct as a commitment that they will conduct all aspects of your job in an ethical and legal manner. They are required to participate in Compliance Program training and review the Code of Conduct annually. Kindred’s Code of Conduct is incorporated into the Employee Handbook by reference and all employees are subject to the requirements of the Code of Conduct.

Kindred’s Code of Conduct describes the Company’s expectations, standards and requirements in its relationships with patients, residents, employees, shareholders, customers, and contractors and the communities in which we work. Kindred requires all employees to comply with all laws and regulations that govern our operations as a healthcare provider, employer and publicly held company.

The federal False Claims Act, 31 U.S.C. §§ 3 729-3733, and similar state laws are some of the most important laws that govern our business. The False Claims Act (FCA) and similar state laws impose liability on persons or companies that make or cause to be made false or fraudulent claims to the government for payment or who knowingly make, use or cause to be made or used, a false record or statement to get a false or fraudulent claim paid by the government. These laws apply to Medicare and Medicaid reimbursement and prohibit, among other things:

• billing Medicare and Medicaid for services not rendered,• billing Medicare and Medicaid for undocumented services,• making improper entries on Medicare and Medicaid

cost reports,• billing Medicare and Medicaid for medically unnecessary

services,• assigning incorrect codes to secure higher Medicare and

Medicaid reimbursement,• characterizing non-covered services or costs in a way that

secures Medicare and Medicaid reimbursement,• failing to seek payment from beneficiaries who may have

other primary payment sources, and• participating in kickbacks.

A violation of the FCA may result in monetary penalties of up to $11,000 per false claim plus three times the amount of damages the government sustains, and exclusion from the Medicare and Medicaid programs. Private citizens, including employees, may file a lawsuit on behalf of the Federal government, and in return, may share a percentage of any monetary recovery or settlement.

The FCA prohibits employers from retaliating, discriminating or harassing employees because of their lawful participation in a federal FCA investigation, report, claim or legal proceeding.

Certain states have adopted Medicaid false claims reporting laws and regulations that may be more stringent than the federal false claims law. A summary of the state Medicaid false claims laws is posted on Kindred’s website, www.kindredhealthcare.com.

Every employee is responsible for reporting suspected violations of Kindred’s Code of Conduct, the FCA, or other healthcare laws or regulations. It is not acceptable to overlook actual or potential wrongdoing. Violation of Kindred’s Code of Conduct may lead to disciplinary action, up to and including separation of employment.

Concern Resolution ProcedureCompliance-related questions and concerns are addressed by following the Open Door Policy as described in our employee handbook. If employees feel the Open Door Policy is inappropriate or they desire anonymity in seeking information or reporting a concern, they can call Kindred’s Compliance Hotline.

No RetaliationKindred prohibits any form of retaliation against an employee for reporting a possible violation of the Code of Conduct in good faith. Any employee who conducts or condones any form of retaliation against another employee for reporting a potential Code of Conduct or regulatory violation will be subject to disciplinary action, up to and including separation of employment.

COPYRIGHT © 2007 Kindred Healthcare Operating, Inc. CSR 58030