Rehabcare Group (RHB)

LTACH 25% Rule

               The Extension Act:

Eliminates application of the 25% Rule for freestanding LTACHs and
grandfathered LTACHs for next three years

Eliminates the recent payment reductions for very short stay outlier cases for
a three-year period

Imposes a three-year moratorium on new LTACHs and new LTACH beds
with some exceptions – we believe all of our announced LTACH JVs will not
be subject to this moratorium

Requires a study by HHS to establish facility and patient criteria.

LTACH 25% Rule

              The Extension Act:

            Eliminates application of the 25% Rule for freestanding LTACHs and
                grandfathered LTACHs for next three years

            Freezes the 25% Rule for hospital-in-a-hospital (HIH) LTACHs at 50% for
                urban and up to 75% for rural and MSA dominant HIH LTACHs for a three
                year period

            Eliminates the recent payment reductions for very short stay outlier cases for
                a three-year period

            Imposes a three-year moratorium on new LTACHs and new LTACH beds
                with some exceptions

            Requires a study by HHS to establish facility and patient criteria.

LTACH 25% Rule

3-year phase-in of rule that limits hospital-in-hospital LTACHs from receiving
no more than 25% of their admissions from a single provider; impacts
Louisiana Specialty Hospital.  Mitigation strategy is currently under
development.

Legislative Update: House Medicare language prevents 25% Rule from impacting
grandfathered LTACHs, such as Louisiana Specialty, and creates specific patient
and facility admission criteria, four-year moratorium on new facilities; legislation
currently under consideration by the Senate Finance Committee

LTACH – 25% Rule

Create specific patient and facility admission criteria

Impose 4 year moratorium on new development (no impact to current
pipeline)

Prevent 25% Rule from affecting grandfathered LTACHs, such as Louisiana
Specialty

Limit short stay outlier policy

Freeze payment rates for 2008 versus 3.2% increase less estimated coding
practices adjustment of 2.5%

LTACH - 25% Rule

Restricts HIH LTACHs to less than 25% of their admissions from host acute care hospital

Final rule issued on 5/1/07 by CMS covers all LTACHs with phase-in over three years
     for cost report years starting 7/1/07; mitigation strategies expected to substantially         
     eliminate the estimated operational impact

Expect Q2 2007 impairment of $4.5-$5.0 million for grandfathered New Orleans
    LTACH intangible asset