Encompass Health (EHC) 8-K Regulation FD Disclosure

Post Q1 2011 Earnings Release - Last updated May 16, 2011

INVESTOR REFERENCE BOOK

Exhibit 99.1

The information contained in this presentation includes certain estimates, projections and other
forward-looking information that reflect our current views with respect to future events and financial
performance. These estimates, projections and other forward-looking information are based on
assumptions that HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will
be differences between such estimates and actual results, and those differences may be material.

There can be no assurance that 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 presentation 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, 2010, the Form 10-Q for the quarter ended
March 31, 2011, and in other documents we previously filed with the SEC, many of which are
beyond our control, that may cause actual results to differ materially from the views, beliefs and
estimates expressed herein.

Note Regarding Presentation of Non-GAAP Financial Measures
The following presentation includes certain “non-GAAP financial measures” as defined in
Regulation G under the Securities Exchange Act of 1934. Schedules are attached that reconcile
the non-GAAP financial measures included in the following presentation to the most directly
comparable financial measures calculated and presented in accordance with Generally
Accepted Accounting Principles in the United States. Our Form 8-K, dated May 16, 2011, to which
the following supplemental slides are attached as Exhibit 99.1, provides further explanation and
disclosure regarding our use of non-GAAP financial measures and should be read in conjunction
with these supplemental slides.

Forward-Looking Statements

2

Exhibit 99.1

Table of Contents

3

Exhibit 99.1

Inpatient Rehabilitation Hospitals (“IRF”)

Outpatient Rehabilitation Satellite Clinics

Long-Term Acute Care Hospitals (“LTCH”)

Hospital-Based Home Health Agencies

Employees

Revenue in 2010

Inpatient Discharges in 2010

Outpatient Visits in 2010

Number of States

Exchange (Symbol)

4

Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S.

Our Company

Marketshare

~ 8% of IRFs
~ 19% of Licensed Beds
~ 22% of Patients Served

Drake acquisition in Cincinnati,
OH; expect to close Q4 2011

CON approved for Ocala, FL;
expect to be operational Q1
2013

Exhibit 99.1

Our Hospitals

Major Services

•Rehabilitation Physicians:manage and treat medical needs of patients

•RehabilitationNurses:oversee treatment programs of patients

•Physical Therapists:address physical function, mobility, safety

•Occupational Therapists:promote independence and re-integration

•Speech-Language Therapists:treat communication & swallowing disorders

•Case Managers:coordinate care plan with physician, caregivers and family

•Post-discharge services:outpatient therapy and home health

5

Exhibit 99.1

Our Patients

6

Most Common Conditions (Q1 2011)

1.Stroke17.3%

2.Neurological16.4%

3.Debility11.4%

4.Fractureofthelowerextremity11.2%

5.Knee/Hipreplacement8.3%

6.Otherorthopedicconditions9.4%

7.Braininjury7.3%

8.Cardiacconditions4.4%

9.Spinalcordinjury3.3%

10.Allother11.0%

Referral Sources

94% Acute Care Hospitals

5% PhysicianOffices

1% SkilledNursingFacilities

Admission to an IRF

•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 (ALOS) =
~14 days

Exhibit 99.1

Our Quality

FIM Gain

Change in
Functional
Independence
Measurement
(based on an 18
point assessment)
from admission to
discharge

7

(1) Average = Expected, Risk-adjusted for UDS database

•Inpatient rehabilitation hospitals evaluate all patients at admission and upon
discharge to determine their functional status.

−The Functional Independence Measurement (“FIM”) patient assessment
instrument is used for these evaluations.

•The difference between the FIM scores at admission and upon discharge is called
the “FIM Gain.”

−The greater the FIM Gain, the greater the patient’s level of independence, the
better the patient outcome.

Exhibit 99.1

(1) The 1,146 total and the 95 for HLS do not include HealthSouth Rehabilitation Hospital of Fredericksburg, VA.Also, HealthSouth Sugar Land Rehabilitation
Hospital, purchased in September 2010, was included in the 135 non-HLS freestanding.

(2) In 2010, HealthSouth averaged 1,150 total Medicare and non-Medicare discharges in its 95 consolidated hospitals and 6 long-term acute care hospitals.

Sources:FY 2011 CMS Rate Setting File - see next page

8

Total Inpatient Rehabilitation Facilities (IRFs): 1,146(1)

Our Cost-Effectiveness

HealthSouth
differentiates
itself by
providing
superior quality
care at a

lower cost.

Exhibit 99.1

CMS Fiscal Year 2012 IRF Rate Setting File Analysis

Notes:

(1) All data provided was filtered and compiled from the Centers for Medicare and
Medicaid Services (CMS) Fiscal Year 2012 IRF rate setting Final Rule file found at
http://www.cms.gov/InpatientRehabFacPPS/07_DataFiles.asp#TopOfPage. 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.

(2) The CMS file contains data for each of the 1,146 inpatient rehabilitation facilities
used to estimate the policy updates for the FY 2012 IRF-PPS Final Rule. Most of the
data represents historical information from the CMS fiscal year 2009 period and
does 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.

9

Exhibit 99.1

Our Payors (Q1 2011)

Prospective Payment System (“PPS”)

•Payments based on Case Mix Groups
(“CMGs”)

–Diagnosis of patient’s illness

•Fixed payment per CMG adjusted for:

–Acuity/severity

–Regional wage differential

•Per diems for “short stays”

Per Diem or CMG

•Negotiated rate

•Some are “tiered” for acuity/severity

Variety of methodologies

Varies by state

Variety of methodologies

Medicare

Managed Care

•Includes managed
Medicare

Other Third-Party Payors

Medicaid

Workers’ Comp./
Patients/Other

Payment Methodology

Payor Source

10

71.2%

20.0%

2.3%

4.8%

1.7%

Exhibit 99.1

Industry Structure

11

Exhibit 99.1

Sources: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, MedPAC.
Data for the year ended December 31, 2009.

Overall Healthcare Spending

Hospital Care
Includes Inpatient Rehabilitation, Long-Term Care Hospitals

$759.1

$137.0

$674.9

$122.6

$68.3

$328.0

Nursing Care Facilities and
Continuing Care Retirement Communities

Professional Services

Other Health, Residential and Personal Care

Home Health Care

Retail of Medical Products

$29.8

Government Administration

$133.2

Net Cost of Health Insurance

$77.2

Government Public Health

$156.2

Investment

National Healthcare Spending: $2,486.3 billion

12

(billions)

Exhibit 99.1

Medicare 2010 Spending = $509.1 Billion (1)

(1)Percentages are based upon total Medicare spending of $521 billion, before $11.9 billion of recoveries for 2010 (CBO Medicare August 2010
Medicare Baseline).

(2)Inpatient Hospital includes spending for acute care hospitals along with, inpatient rehabilitation and long-term care hospital services; in 2009,
Medicare spent $5.7 and $4.9 billion, respectively, for these services (MedPAC Data Handbook, June 2010).

(3)Other Services reflects spending for hospice; in 2008, Medicare spent $11.2 billion for hospice services. (MedPAC Data Handbook, June 2010). Other
Services also reflects spending for various other outpatient services.

$     26B    Skilled Nursing

$   139B    Inpatient Hospital (2)

$67.3BPhysician Payments

$31.1BOutpatient Hospital

$19.6BHome Health

$      63B   Other Services (3)

$58.2BOutpatient Rx

5%

27%

22%

11%

12%

4%

6%

13%

$5.7B (1%)
Inpatient Rehabilitation Hospitals

Medicare Part B

Medicare Part B

Medicare Part C

Medicare Part C

Medicare Parts A&B

Medicare Parts A&B

Medicare Part D

Medicare Part D

Medicare Part A

Medicare Part A

13

Exhibit 99.1

Preventive

Routine health
care that
includes
screenings,
check-ups, and
patient
counseling to
prevent illnesses,
disease, or other
health problems.

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.
E.G., blood tests,
X-rays,
endoscopy,
certain biopsies,
certain surgical
procedures.

Post-Acute

Medical care
provided after a
period of acute
care. E.G.,
inpatient
rehabilitation
hospitals,
hospice, skilled
nursing homes,
home health

Continuum of Healthcare Services

14

Exhibit 99.1

Note:These numbers are program spending only and do not include beneficiary copayments.

Source:Centers for Medicare and Medicaid Services, Office of the Actuary (MedPAC June 2010 Data Book - Page 130), 2009 and 2010
Medicare Trustee s Report

Skilled nursing
facilities18.1%

Home health
agencies17.7%

Inpatient

rehabilitation

hospitals8.4%

Long-term acute

care hospitals5.7%

15

2009
Medicare
Margin

Post-Acute Settings

Inpatient rehabilitation
spending (% of total
Medicare spending)

Exhibit 99.1

Readmission Rates

Note:Use of home health care and hospice is based on care that starts within three days of discharge. Other PAC care starts within one
day of discharge. Home health use includes episodes that overlap an inpatient stay.

Source:Medicare Payment Advisory Commission, “A Data Book:Healthcare spending and the Medicare program,” Chart 9-3 (June
2008)

16

Exhibit 99.1

Future Regulatory Risk	Inpatient Rehabilitation Facility	Skilled Nursing Facility	Long-Term Acute Care Hospital	Home Health	Hospice
1.Re-basing payment system	No	Yes; RUGS IV and MDS 3.0 parity adjustment proposed for FY 2012	No	Yes; would be required as part of PPACA starting in 2014	Yes: Required by PPACA beginning in 2013; Modified wage index system being phased in over 7-year period beginning in FY 2010
2.Major outlier payment adjustments	No	No	Yes; will occur when MMSEA relief expires (short stay outliers)	Yes; 10% cap per agency; 2.5% taken out of outlier pool (per PPACA)	No
3.Upcoding adjustments	No	No	Yes; occurring in FY 2011	Yes; occurring in CY 2011 (-3.79%), and potential further reduction CY 2012	No
4.Patient criteria	No; 60% Rule already in place	No	Industry developing criteria	PPACA requires a patient - physician “face-to-face” encounter; new therapy documentation requirement	PPACA requires a patient - physician “face-to-face” encounter
5.Healthcare Reform
•Market basket update reductions	•Known	•Known	•Known	•Known	•Known
•Productivity adjustments	•Begins FY 2012	•Begins FY 2012	•Begins FY 2012	•Begins 2015	•Begins 2013
•Bundling pilot established	•By 2013	•By 2013	•By 2013	•By 2013	•N/A
•Independent Payment Advisory Board	•CY 2019	•FY 2015	•CY 2019	•CY 2015	•CY 2019
•New quality reporting requirements	•Begins FY 2014	•N/A	•Begins FY 2014	•N/A	•Begins FY 2014
•Value based purchasing	•Pilot begins 2016	•Post 2012	•Pilot begins 2016	•Post 2012	•Pilot begins 2016
•Hospital Acquired Infections	• Post 2012	• Post 2012	•Post 2012	•N/A	•N/A
6.Other	N/A	Proposed new group therapy documentation requirements	25% Rule regulatory relief expires in 2012/2013; prohibition on new LTCHs through 2012	Limits on transfer of ownership	MedPAC recommending overhaul of payment system methodology in FY 2013

Post-Acute Regulatory Risks

Sources:Healthcare Reform Bill (PPACA, HERA),CMS Regulatory published rules and MMSEA

17

17

Exhibit 99.1

Historical Perspective

18

Exhibit 99.1

Historical Perspective

19

2007 Adjusted
EBITDA (1) =
$318.3

2007

•Used proceeds plus tax refund to repay $1.4 billion of debt

•Reduced G&A to match residual business size

•Piloted TeamWorks sales and marketing

•75% rule frozen at 60% (MMSEA)

•Completed all settlement payments

(1)Reconciliation to GAAP provided on slides 40, and 85 - 90.

Exhibit 99.1

Historical Perspective

20

2008

•Established 2008-2010 business model

•4% discharge growth; 5-8% Adjusted EBITDA growth;15-20% adjusted EPS growth

•Balanced delevering and growth/development strategies

•Completed TeamWorks sales and marketing roll-out

•Absorbed Medicare reimbursement rollback (Q2)

•Repaid $228 million of long-term debt (8.8 million equity issuance and prior period
tax refunds)

•Financial market turmoil (Q3)

•HealthSouth suspended development and increased focus on delevering

$318.3

2008 Adjusted
EBITDA (1) =
$341.2

(1) Reconciliation to GAAP provided on slides 40, and 85 - 90.

Exhibit 99.1

Historical Perspective

21

2009

•Continued focus on delevering (~ $151 million repaid)

•Focused on organic growth; TeamWorks sustainability module rolled out

•Issued 5 million shares for securities litigation settlement (Q3)

•Received first Medicare market basket update in 18 months (Q3)

•Reinvigorated development efforts (Q4)

$318.3

$341.2

2009 Adjusted
EBITDA (1) =
$383.0

(1) Reconciliation to GAAP provided on slides 40, and 85 - 90.

Exhibit 99.1

Historical Perspective

22

$318.3

$341.2

$383.0

2010 Adjusted
EBITDA (1) =
$427.4

2010

•Healthcare reform passed; reduced future market basket updates

•Weak acute care referral volumes

•Adjusted annual volume growth target to 2.5-3.5%

•Development efforts pay off

•2 de novos, 2 IRF acquisitions, 2 unit acquisitions

•Refinanced term loans and revolver (Q4)

•Repaid $151.2 million in debt

•Flexibility to repay or refinance the 10.75% notes callable in June 2011

(1)Reconciliation to GAAP provided on slides 40, and 85 - 90.

Exhibit 99.1

Historical Perspective

23

$318.3

$341.2

$383.0

2011

•Acute care volumes still low

•Annual volume growth target to 2.5-3.5%

•Completed public offering of $122 million by reopening 2018 and 2022
senior notes.

•Raised the de novo growth target to ~4-6/year

•Will call $335 million of 10.75% senior notes due 2016 in June 2011

(1)Reconciliation to GAAP provided on slides 40, and 85 - 90.

Q1 2011
Adjusted
EBITDA (1)
= $123.4

$427.4

Exhibit 99.1

Our Track Record

($ in millions)

(1) Reconciliation to GAAP provided on slides 40, and 85 - 90.

(2) 2010 and Trailing 4Qtrs both include a tax benefit of ~$825 million for the reversal of the valuation allowance.

24

Exhibit 99.1

Our Track Record

25

Leverage Ratio(1)

(billions)

(1)Reconciliation to GAAP provided on slides 39, 40, and 85 - 90.

Interest Expense

$229

$131

Exhibit 99.1

Revenues & Expenses

26

(1)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.

Exhibit 99.1

Adjusted EBITDA (1)

27

(1)Reconciliation to GAAP provided on slides 40, 85 - 87, and 90.

Exhibit 99.1

(1) Does not include 2.0 million warrants issued in connection with a January 2004 loan repaid to Credit Suisse First
Boston. In connection with this transaction, we issued warrants to the lender to purchase two million shares of
our common stock. Each warrant has a term of ten years from the date of issuance and an exercise price of
$32.50 per share. The warrants were not assumed exercised for dilutive shares outstanding because they were
antidilutive in the periods presented.

(2) The agreement to settle our class action securities litigation received final court approval in January 2007.
These shares of common stock and warrants were issued on September 30, 2009. The 5.0 million of common
shares are now included in the outstanding shares. The warrants to purchase approx. 8.2 million shares of
common stock at a strike price of $41.40 were not assumed exercised for the dilutive shares outstanding
because they are anti-dilutive in the periods presented.

(3) The difference between the basic and diluted shares outstanding is primarily related to our convertible
perpetual preferred stock. The preferred stock is convertible, at the option of the holder, at any time into
shares of common stock at an initial conversion price of $30.50 per share, which is equal to an initial conversion
rate of approximately 32.7869 shares of common stock per share of preferred stock, subject to a specified
adjustment. On or after July 20, 2011, we may cause the shares of preferred stock to be automatically
converted into shares of our common stock at the conversion rate then in effect if the closing price of our
common stock for 20 trading days within a period of 30 consecutive trading days ending on the trading day
before the date we give the notice of forced conversion exceeds 150% of the conversion price of the
preferred stock.

28

Exhibit 99.1

Business Outlook
2011 to 2013

29

Exhibit 99.1

Business Outlook: 2011 to 2013

Business Model

•Adjusted EBITDA CAGR: 5-8% (1)

•Adjusted Free Cash Flow CAGR: 12-17% (1)

Strategy

2010

2011

2012

2013

Delevering (2)

Achieved 3.5xdebt to EBITDA

Longer-Term Goal: ~ 3.0x debt to EBITDA

Growth

Organic growth (includes capacity expansions)

De novos(~4-6/year)

IRF acquisitions (~ 2-3/year)

Opportunistic, disciplined acquisitions
of complementary post-acute services

Key Operational
Initiatives

•Beacon (Management ReportingSoftware) = Labor / outcomes / quality optimization

•TeamWorks = Care Management

•“CPR” (Comfort, Professionalism, Respect) Initiative

(1)Reconciliation to GAAP provided on slides 39, 40, and 85 - 90.

(2)Exclusive of any E&Y recovery.

30

De novos(~2-3/year)

Increased
De novo growth
to ~4-6/year

Exhibit 99.1

Business Outlook: Revenue Assumptions

Revenue

Volume

•2.5% to 3.5% annual growth (excludes
acquisitions)

•Includes bed expansions, de novos
and unit consolidations

Medicare

Managed
Care

Other

(1) We believe based on the 2011 Medicare rule for IRFs, HealthSouth should realize an increase of approximately 2.1% annually.

(2) CMS proposed IRF Rule for FY 2012 and management estimates for FY 2013

31

Exhibit 99.1

Business Outlook: Expense Assumptions

Expense

Salaries & Benefits (1)

Hospital Expenses

•Other operating and supplies
tracking with inflation

4.5% of revenue

(excludes stock-based compensation)

Salaries

& Benefits

Hospital
Expenses

(1) Salaries, Wages and Benefits: 85% Salaries and Wages; 15% Benefits

32

Exhibit 99.1

Guidance

33

Exhibit 99.1

2011 Guidance - Adjusted EBITDA (as of May 16, 2011)

Adjusted EBITDA (1)

$440 million to $450 million

(1) Reconciliation to GAAP provided on slides 40 and 85 - 90.

Considerations:

ü2010 bad debt expense was 0.9% of revenue; expect 2011 bad debt expense to
be approximately 1.4% of revenue, in line with historical average

üMedicare pricing in Q4 2011 will be reduced by a 120 basis point productivity
adjustment.

üOutpatient revenues subject to approximately $1.4 million reduction related to
the 25% rate reduction for reimbursement of therapy expenses for multiple therapy
services (Medicare physician fee schedule for calendar year 2011CMS).

Based on strong results for Q1 2011, HealthSouth expects
its 2011 full-year results to be at the high end of, or
greater than, this guidance range.

34

Exhibit 99.1

Income Tax Considerations

35

GAAP Considerations:

•As of 3/31/11, the Company had a remaining valuation allowance of approximately
$106 million, primarily related to state NOLs.

•Q1 2011 tax provision reflects a tax benefit of $0.27 per diluted share related to the
Company’s settlement with the IRS for tax years 2007 and 2008 and a reduction in
unrecognized tax benefits due to the lapse of the statute of limitations for certain
federal and state claims. The settlement resulted in an increase to our federal NOLs,
which had an ending balance of approx. $1.45 billion as of 3/31/11.

•Expect effective tax rate of ~40% going forward

Future Cash Tax Payments:

•The Company expects to pay approximately $7-$10 million per year of income tax.

•The Company does not expect to pay significant federal income taxes for up to 10
years.

•HealthSouth is not currently subject to an annual use limitation (“AUL”) under Internal
Revenue Code Section 382 (“Section 382”). A “change of ownership,” as defined by
Section 382, would subject us to an AUL, which is equal to the market capitalization of
the Company at the time of the “change of ownership” multiplied by the long-term
tax exempt rate.

Exhibit 99.1

Adjusted Free Cash Flow (1)Assumptions

(1)Reconciliation to GAAP provided on slide 39.

•Items that will affect Adjusted Free Cash Flow in 2011:

+Cash settlements for interest rate swaps will be $33.8 million lower in 2011.

+Interest expenseis expected to be approx. $70 million in first half of 2011($10 million
higher than same period last year) and approx. $57 million in the second half of 2011 as
a result of calling $335 million of the 10.75% senior notes in June 2011.

–Maintenance capital expenditures are estimated to be approximately $20 million higher
in 2011 than 2010.

•2010 working capital benefited from a shift in timing of interest payments related to the
refinancing in Q4 2010, offset by the $6.9 million unwind fee related to the termination of
the two forward-starting interest rate swaps.

HealthSouth’s GAAP income statement will be affected by a
number of items that will not affect cash flow from operating
activities or adjusted free cash flow:

•Normalized GAAP tax rate resulting from the valuation
allowance reversal in Q4 2010.

•Loss on early extinguishment of debt

Business Model: Multi-Year Adjusted Free Cash Flow 12% to 17% CAGR

36

Exhibit 99.1

2011 Guidance - EPS (as of May 16, 2011)

Diluted Earnings per Share from
Continuing Operations Attributable
to HealthSouth (2)

$1.28 to $1.33 (5)

Considerations:

üIncludes $0.27 per diluted share benefit for Q1
2011 and assumes provision for income tax of
40% for the remainder of 2011; cash taxes
expected to be $7-$10 million.

üGuidance does not include the EPS effect that will
result from calling $335 million of the 10.75% senior
notes in June 2011.

•Interest expenseis expected to be approx.
$70 million in first half of 2011and approx. $57
million in the second half of 2011.

•Loss on early extinguishment of debt is expected
to be approx. $26 million.

üDepreciation is estimated to be higher as a result
of capital expenditures in prior periods.

Based on strong results for Q1 2011,
HealthSouth expects its 2011 full-year
results to be at the high end of, or
greater than, this guidance range.

(1)Adjusted income from continuing operations. This non-GAAP measure was part of our historical guidance. A reconciliation of adjusted income from
continuing operations to the corresponding GAAP measure can be found on slides 91 and 92.

(2)Income from continuing operations attributable to HealthSouth

(3)Current period amounts in income tax provision; see slides 91 and 92

(4)Total income tax provision for full-year 2010, including the reversal of a substantial portion of the Company's valuation allowance against deferred tax assets.

(5)Includes a $0.27 per diluted share benefit related to the Company’s settlement with the IRS for tax years 2007 and 2008, and a reduction in unrecognized tax
benefits due to the lapse of the statute of limitations for certain federal and state claims.

37

Exhibit 99.1

Free Cash Flow

38

Exhibit 99.1

Adjusted Free Cash Flow

(1)Maintenance capital expenditures are expected to be $20 million higher in 2011 than in 2010.

(2)Final swap payment of $10.9 million was made in March 2011.

39

Exhibit 99.1

Net Cash Provided by Operating Activities

40

Exhibit 99.1

Adjusted Free Cash Flow(1) (2010 vs. 2009)

(1)Reconciliation to GAAP provided on slides 39, 40, 86, 87, and 90.

41

(1)

Exhibit 99.1

Free Cash Flow Reinvestment

42

•$500 million of 10.75% notes callable June 2011

•Growth in core business

•Bed expansions

•De novo hospitals

•Hospital acquisitions

•Acute care IRF unit acquisition/consolidation

•Purchase properties under operating leases

•Lower capital cost

•Greater control of property, CON and/or license

•Share repurchase

•Offset shares underlying convertible preferred shares

•Offset shares issued in settlement of securities litigation

Business Model: Adjusted free cash flow CAGR: 12-17%

•Acquisitions of complementary businesses

Exhibit 99.1

Refinancing and Delevering

43

Exhibit 99.1

Debt Schedule as of March 31, 2011(1)

(1)In May, the Company amended its credit agreement and added a $100 million term loan maturing in 2016, and extended the maturity
of its revolver to 2016. Both will initially bear an interest rate of LIBOR plus 250.

(2)Based on 4-quarter trailing and 2010 Adjusted EBITDA of $444.4 million and $427.4 million, respectively; reconciliation to GAAP provided
on slides 40, 85, 86, and 90.

44

Exhibit 99.1

(1)Based on 2008 and trailing 4 quarter Adjusted EBITDA of $341.2 million and $444.4 million, respectively; reconciliation to GAAP provided
on slides 40, 85 - 88, and 90.

Debt, Liquidity, and Swaps

Liquidity

45

	S&P	Moodys
Corporate Rating	B+ Positive	B1 Positive
Revolver Rating	BB	Ba1
Senior Notes Rating	B+	B2

Credit Ratings

Exhibit 99.1

(2)Does not include $387.4 million of convertible perpetual preferred stock and capital leases and other note payables.

Increasing Initial Call of the 10.75% Senior Notes

46

Call schedule:

June 15, 2011 (price 105.375);

June 15, 2012 (price 103.583);

June 15, 2013 (price 101.792);

June 15, 2014 and thereafter
(price 100.000)

$500

Revolver

L+250

§Updated plan to call $335 million in principal on June 15, 2011 (cash use approx. $353 million)

•$100 million term loan, $77 million cash on hand resulting from the $120 million senior
note offering in March 2011, and borrowings under the $500 million revolver

•Loss on early extinguishment of debt is expected to be approx. $26 million.

§The Company now expects interest expense(1) to be approx. $70 million in first half of 2011
and approx. $57 million in the second half of 2011.

Proforma June 30, 2011 Debt Maturity Profile (2)

$49 LC

$275
Undrawn

$275
Undrawn

2016

Exhibit 99.1

Use of Revolver

•Liquidity should be sufficient to address:

–Initial outlays for the accelerated de novo plan

–Short-term disruptions to the financial system

–Short-term disruptions to our business

–Unforeseen cash requirements

•Liquidity target has both objective and subjective components

–The Company’s current target is ~$250 million.

•Liquidity target subject to change based on:

–Economic developments

–Conditions in the financial markets

–Continued balance sheet deleveraging

–Regulatory change

–Growth in our business

47

Refinancing capacity within the revolver is limited by liquidity
considerations.

Exhibit 99.1

Credit Agreement Key Covenant (1)

	Terms
Acquisitions	Limited by compliance with leverage and interest coverage covenants initially established at 5.0x and 2.5x respectively
Restricted payments:
10.75% repurchase	Unlimited up to 4.5x leverage ratio (revolver draws available for repurchase)
Share repurchase (2)	$200 million (shared with other restricted payment basket)
Other debt repurchase (2)	$200 million (shared with other restricted payment basket)
Unsecured debt issuance	Unlimited up to 4.5x leverage ratio

48

(1)Full agreement filed November 23, 2010 and amended on May10, 2011

(2)The maximum amount limitations above are subject to increase by a “grower” basket equal to 50% of excess cash flow plus certain
other amounts including net cash proceeds from certain equity issuances.

Exhibit 99.1

Growth

49

Exhibit 99.1

Demographics

+ population growth and changes (weighted by age)

= Rehab CAGR

Growth goals for the market and/or hospital

Sales and Marketing Strategies

•Defining “upstream” opportunities

•Identifying CMS-13 discharges

•“Converting” CMS-13 patients to rehab

Market Dynamics

•Existing IRF beds

•Managed care penetration

•Competition

Organic Growth: A Strategic Framework

Bottoms-up approach
to HealthSouth’s
growth projections

50

Exhibit 99.1

Organic Growth: Compounded Annual Growth Rate (CAGR) (1)

(1)Numbers in map are for illustrative purposes only and do not represent actual results.

(2)“Weighted for Rehab Services” - methodology weights growth in rehab age groups higher.

% CAGR
Rehab by Zip Code

Weighted for Rehab Services (1) (2)

Organic Growth

•Demographic
changes

•Population
growth

% CAGR Weighted for Rehab Services

Treasure Coast Primary2.64%

Treasure Coast SSA - Glades1.47%

Treasure Coast SSA - Martin2.92%

Okeechobee2.34%

Treasure Coast Tertiary2.24%

Combined2.45%

State of Florida2.72%

USA2.31%

51

Exhibit 99.1

Market Selection Process

52

Active
Development
List

Corporate
Priority
Assessment

Strategic
Approach

•Build

•Buy

•JV

Regional
President
Assessment

Existing IRF
Assessment

Target
Opportunity List

(160 opportunities
identified)

National
Market
Assessment

(3,141 counties in 48 states studied)

•Population and
Demographics

•Acute Care Referral
Sources

•Inpatient Rehab
Competition

•Other Competitors

•Payor Environment

•CON/Non-CON

Exhibit 99.1

CON
Approval

Site
Selection

Cost
Assessment

Pro forma
Financials

Execution

•Design

•Construction

NO

GO

GO

De Novo Evaluation Process

53

Market
Selection

GO

NO

GO

Exhibit 99.1

Illustrative De Novo Timeline

54

Day 1

CON Process

Construction

With CON

Design

Planning

& Zoning

Month 20

Groundbreaking

Month 32

Opening

Construction

Design

Planning

& Zoning

Month 11

Groundbreaking

Month 20

Opening

Day 1

Without CON

Exhibit 99.1

Illustrative De Novo Pro forma (40 bed)

55

Capital Cost	$ Range
(millions)	Low	High
Construction, design, permitting, etc.	$11.0	$14.5
Land	1.5	3.5
Equipment	2.5	3.0
	$15.0	$21.0
Pre-opening Expenses
(thousands)	Low	High
Operating	$200	$300
Salaries, wages and benefits	150	200
	$350	$500

Exhibit 99.1

(1)Hospital EBITDA = earnings before interest, taxes, depreciation and amortization directly attributable to the related hospital.

56

Sustained positive
EBITDA

Occupancy

Sustained positive
EBITDA

Sustained,
positive EBITDA

Exhibit 99.1

IRF Acquisition Performance

57

	Date Acquired	Acquired Census	Q1 2011 Census
Vineland	Q3 2008	26	36
Desert Canyon	Q2 2010	16	36
Sugar Land	Q3 2010	26	34
Ft. Smith	Q3 2010	15	36

Value added by HealthSouth

•TeamWorks approach to sales/marketing

•Labor management tools and “best practices”

•Clinical expertise

•Clinical technology and programming

•Supply chain efficiency

•Medical leadership and clinical advisory boards

Exhibit 99.1

Portfolio Growth

Cash Payback Period

Year 1Year 2Year 3Year 4Year 5Year 6Year
7

Acquisitions

De novos(1)

(1)Assumes average investment per bed:~ $450K.

58

•Target: 4-6 de novos and acquisitions/yr

•All projects have minimum IRR of 15%.

•Longer payback on de novos versus
acquisitions is attributable to:

-12-15 month construction period

-Initial ramp-up of operations on de novos

Exhibit 99.1

59

Acute Care
Hospital

Discharge

Hospice

Inpatient
Rehabilitation
Facility (1)

Skilled
Nursing
Facility

Home
Health (1)

(Highest Acuity)

(Lowest Acuity)

Future Growth: Complementary Post-Acute Care Services

Source: MedPac and CMS

(1) For information on HealthSouth’s hospital portfolio, see slide 4.

Exhibit 99.1

•Growth strategies will complement delevering priority.

-“Highest and best use” of FCF will determine where to invest.

•The company continues to have excellent organic growth opportunities.

-Locations in above-average “Rehab CAGR” markets

-Non-discretionary nature of many conditions served

-Track record of consistent market share gains

•De novos and targeted IRF acquisitions will allow entry to, and growth in,
new markets.

-Disciplined evaluation process

-Proven track record of success

•Longer-term consideration of acquiring complementary post-acute
services predicated on:

-Achieving delevering objective

-Obtaining regulatory clarity

-Favorable market conditions

Growth: Summary

60

Exhibit 99.1

Operational Initiatives

61

Exhibit 99.1

Key Operational Initiatives: Summary

•Strong track record of providing high-quality, cost-effective care

–Functional gains exceed industry norms

–Consistent market share gains

–Disciplined expense management

•Targeted operational strategies to achieve excellence in:

–Clinical care (Care Management; reduced Acute Care Transfers)

–Operations (BEACON; patient scheduling; supply chain)

–Service (CPR; “customer training”)

•Implementation of a Clinical Information System

–Rehabilitation-specific (Cerner)

–Manageable, five-year rollout beginning in 2012

62

Exhibit 99.1

Operational Strategy

Excellence in …

63

•Initiate Care
Management
TeamWorks project

•Identify trends and
establish “best
practices” for the
prevention of
acute care transfers

•Provide a robust
rehabilitation
specific clinical
education program
for nurses and
therapists

•Develop and roll out
BEACON
management
reporting system

•Evaluate options for
and pilot patient
scheduling systems

•Standardize
pharmacy and food
supplies purchasing

•Implement new
patient satisfaction
survey tool through
Press Ganey

•Launch CPR
(Comfort,
Professionalism,
Respect) patient
experience
campaign

•Develop and
implement
customer training
videos for hospital
staff

Clinical Care

Operations

Service

Exhibit 99.1

TeamWorks: Care Management

64

Goals

•Improve overall operational,
patient care and satisfaction
outcomes

•Streamline delivery of care

•Engage interdisciplinary teams

•Reduce:

―Complication rate

―Cost per case

―Payor denials

•Increase:

―Reimbursement

―Patient involvement in care
decisions

Design a HealthSouth Care Management Playbook to be
implemented across all hospitals

Referral Management

Pre-authorization / Pre-
certification

Patient Assessment

Care Delivery &
Documentation

Interdisciplinary Team
Process

Denials & Approvals

Outcomes Analysis

Effective & Efficient
Care Management

Exhibit 99.1

Pilot Process

Finalize Training
Modules

Implement

October - November 2010

Test the application of the
newly designed Playbook,
tools, processes and forms.
Gather feedback and
improve the process for the
2011 implementation.

December 2010

Review pilot findings and
finalize Playbook and
training.

January - March 2011

Begin training and
communicate company-wide
implementation strategy.
Implementation complete in 39
hospitals.

TeamWorks: Care Management Project Overview

65

– July 2009 Core team assembled

Current State
Assessment

Future State Vision

Design Process

May - June 2010

KPMG visited 10 hospitals (2
within each region) to assess
and document the current
state of the case
management process. Site
visits included interviews,
observation, and
documentation review.

July 2010

KPMG facilitated an
Accelerated Solutions
Design (ASD) 30-day session
with 23 HealthSouth
employees. The team laid
the framework for the
desired future state of case
management.

August - September 2010

17 of the HealthSouth
employees involved in the ASD
returned for a 3-week design
session. The team developed or
updated tools and templates
to support the future state. Their
body of work was combined to
form the HealthSouth Care
Management Playbook.

Exhibit 99.1

CPR: Comfort, Professionalism, Respect

•All employees will be trained in the CPR campaign.

•Hospital-based trained facilitators will work directly with
employees.

•A series of short videos is used to depict common scenarios of
patient/staff situations.

•Facilitator training is highly interactive, encouraging discussions
among staff.

CPR is an in-house course designed to train all employees to
realize that even minor encounters between staff and
patients can have a memorable impact on the patient’s
entire experience.

Ultimate goal is to improve employee-to
-patient interactions, leading to:

•Improved patient satisfaction scores

•Reduced patient complaints

•More satisfied employees

66

Exhibit 99.1

67

Exhibit 99.1

68

BEACON: Hospital-Specific (1)

(1) Numbers in screen shot have been modified for presentation and do not represent actual results.

Exhibit 99.1

69

BEACON: Regional Roll-up (1)

(1) Numbers in screen shot have been modified for presentation and do not represent actual results.

Exhibit 99.1

Clinical Information Systems in Healthcare

•Clinical information systems (CIS) are a key component of
successful quality, safety and patient satisfaction initiatives in
healthcare.

•Hospitals that implemented Computerized Physician Order
Entry (CPOE) reported better quality of care and lower
mortality rates according to a recent study. (1)

•2008 100 Most Wired Hospitals achieved significantly better
quality indicators than other hospitals via: (2)

–Mortality rate

–Patient safety index

–Core measures index

CIS adoption is not solely responsible for these results,
AND … adoption of CIS in healthcare is very slow!

70

(1) Source:Joint Commission Journal on Quality and Patient Safety, June 2008

(2) Source:The 100 Most Wired Hospitals and Health Systems 2008, Hospitals and Health Networks, July 2008

Exhibit 99.1

Source:HIMSS AnalyticsTM Database

Stage 2

Clinical Data Repository, Controlled Medical Vocabulary,

may have Document Imaging; Health Info Exchange capable

Stage 3

Digital Radiology

Stage 4

Computerized Physician Order Enter,

Clinical Decision Support (clinical protocols)

Stage 5

Closed loop medication administration, 5 rights with bar code

Stage 6

Physician documentation (structured templates), full Clinical

Decision Support (variance & compliance), full Digital Imaging

Stage 7

Complete EMR; standardized transactions to share data; Data

warehousing; Data continuity with Emergency Dept, ambulatory

Stage 1

Ancillaries - Lab, Radiology, Pharmacy - All Installed

Stage 0

All Three Ancillaries - Lab, Radiology, Pharmacy Not Installed

2005

0.0%

0.0%

.001%

2.5%

10.0%

48.8%

19.6%

18.4%

0.7%

1.6%

3.8%

7.4%

50.9%

16.9%

7.2%

2009

Final

11.5%

2005-2009 Electronic Medical Record (EMR) Adoption
Model Trends
(5,235 non-federal acute care U.S. hospitals)

71

Exhibit 99.1

EMR Adoption Model

•Most U.S. hospitals are at Stage 3
(Foundation Stage) or below.

•Stages 0, 1 and 2 are slowing.

•Stage 3 is growing the fastest.

–10% in 2005 - 50.9% in 2009

•Advanced Stages 3 through 7:

–Require only one service or unit
to be implemented

–Reduce medical errors and
improve clinical outcomes

•Stage 5 is the most difficult to achieve.

–Integration, technology and reengineering requirements

–Significant investment in capital, executive commitment and culture adoption

•Over86% of U.S. Hospitals do NOT have CPOE (computerized physician
order entry) implemented.

72

Exhibit 99.1

HealthSouth Clinical Information Technology
Current State

73

Exhibit 99.1

Vendor Selection Process

74

2005

Request for
Proposal

2007

Project on
hold

2009

Cerner final
selection

July 2009

Core team
assembled

13 vendors
responded;
3 finalists

Due to
business unit
divestitures

Why Cerner?

•Inpatient
rehabilitation-specific
application

•Integrated solution
meeting all functional
requirements

•Enterprise capable
vendor with scalability

•Positive references

Exhibit 99.1

Key Features

75

Exhibit 99.1

Project Timeline

76

Project On Hold

(Divestitures)

2007

Clinical

Visioning

2005

Cerner

Selected

Feb 2009

Vendor

Evaluations

2006

Project Restart
& Vendor

Re-evaluations

2008

Pilot
Contract

Negotiation

Jun 2009

Pilot

“Go-Live”

Jun 2010

Pilot Project

Kickoff

Aug 2009

Benefits

Recognition

Study (“BRS”)

Jul - Dec 2010

Next Steps

•Continue Pilot

•Plan
Implementation

Analyze

BRS

March 2011

Review

with Board

May 2011

Finalize Vendor
Selection

May 2011

Exhibit 99.1

Operational Metrics

77

Exhibit 99.1

(1)Data provided by UDSMR, a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry,
including HealthSouth sites.

(2)Includes consolidated HealthSouth inpatient rehabilitation hospitals and long-term acute care hospitals classified as same store during
that time period.

•HealthSouth’s
volume growth has
outpaced
competitors’.

•TeamWorks =
standardized and
enhanced sales &
marketing

•Bed additions will
help facilitate
continued organic
growth.

10.7%

9.4%

5.6%

2.6%

4.6%

5.5%

5.8%

5.8%

5.3%

2.5%

2.2%

1.1%

78

2008 vs.2009 vs.2010 vs.Q110 vs.Q210 vs.Q310 vs.Q410 vs.Q111 vs.

200720082009Q109Q209Q309Q409Q110

Exhibit 99.1

Operational Metrics: Expense Efficiencies

(% of Net Operating Revenues)

200820092010201120082009201020112008200920102011

(3 Months)(3 Months)(3 Months)

3.623.533.503.40

EPOB

•Salaries, Wages & Benefits reflects continued improvement from
productivity gains.

•Hospital-related Expenses includes other operating, supplies,
occupancy, and bad debts expenses.

•General and Administrative excludes stock-based compensation.

•Employee 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.

79

Exhibit 99.1

(2)Excludes approximately 400 full-time equivalents, 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 above table represent HealthSouth employees who participate in or support the operations of the Company’s
hospitals.

(3)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.

80

Exhibit 99.1

Payment Sources

(1)Managed Medicare revenues represent ~ 7%, 7%, 8%, and 8% of total revenues for Q1 2011, Q1 2010, 2010, and 2009, respectively, and
are included in “Managed care and other discount plans.”

81

Exhibit 99.1

Value Proposition

82

Exhibit 99.1

(1)Reconciliation to GAAP provided on slides 39, 40, and 85 - 90.

The HealthSouth Value Proposition

Poised for Growth

Financial Strength/Strong
Cash Flow Generation

Industry Leading Position

Attractive Healthcare Sector

83

Exhibit 99.1

Reconciliations to GAAP

84

Exhibit 99.1

Reconciliation of Net Income to Adjusted EBITDA(1)(3)

(1) (2) (3) - Notes on page 90.

85

Exhibit 99.1

Reconciliation of Net Income to Adjusted EBITDA(1)(3)

(1) (2) (3) - Notes on page 90.

86

Exhibit 99.1

Reconciliation of Net Income to Adjusted EBITDA(1) (3)

(1) (2) (3) - Notes on page 90.

87

Exhibit 99.1

Reconciliation of Net Income to Adjusted EBITDA(1) (3)

(1) (2) (3) - Notes on page 90.

88

Exhibit 99.1

89

Reconciliation of Net Income to Adjusted EBITDA(1) (3)

(1) (2) (3)- Notes on page 90.

Exhibit 99.1

Reconciliation Notes for Slides 85-89

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 financial 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 above.

2.Per share amounts for each period presented are based on diluted weighted average
shares outstanding unless the amounts are antidilutive, in which case the per share
amount is calculated using the basic share count after subtracting the $6.5 million per
quarter dividend on the convertible perpetual preferred stock. The difference in shares
between the basic and diluted shares outstanding is primarily related to our
convertible perpetual preferred stock.

3.Adjusted EBITDA is a component of our guidance.

90

Exhibit 99.1

Reconciliation of Net Income to Adjusted Income from Continuing Operations and
Adjusted EBITDA(1) (3) (4)

(1) (2) (3) (4) - Notes on page 92.

91

Exhibit 99.1

Reconciliation Notes for Slide 91

1.Adjusted income from continuing operations and Adjusted EBITDA are 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 financial measure.
Management and some members of the investment community utilize adjusted
income from continuing operations as a financial measure and Adjusted EBITDA and
the leverage ratio as liquidity measures 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 these adjusted measures,
the reader should be aware that in the future HealthSouth may incur expenses similar
to the adjustments set forth above.

2.Per share amounts for each period presented are based on basic weighted average
common shares outstanding for all amounts except adjusted income from continuing
operations per diluted share, which is based on diluted weighted average shares
outstanding. The difference in shares between the basic and diluted shares
outstanding is primarily related to our convertible perpetual preferred stock.

3.Adjusted income from continuing operations per diluted share and Adjusted EBITDA
are two components of our historical guidance.

4.The Company’s credit agreement allows certain other items to be added to arrive at
Adjusted EBITDA, and there may be certain other deductions required.

92

Exhibit 99.1