UNITED STATESd18rn0p25nwr6d.cloudfront.net/CIK-0000785161/532bedae-3f... · 2017. 10. 26. · On...

UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 8-KCURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 26, 2017

HealthSouth Corporation(Exact name of Registrant as specified in its Charter)

Delaware(State or Other Jurisdiction of Incorporation)

001-10315 63-0860407(Commission File Number) (IRS Employer Identification No.)

3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243

(Address of Principal Executive Offices, Including Zip Code)

(205) 967-7116(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of1934. Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. o

The information contained herein is being furnished pursuant to Item 2.02 of Form 8‑K, “Results of Operations and Financial Condition,” and Item 7.01 of Form 8-K,“Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), orincorporated by reference in any filing under the Securities Act of 1933, as amended, (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specificreference in such a filing.

ITEM 2.02. Results of Operations and Financial Condition.

On October 26, 2017 , HealthSouth Corporation (the “Company”) issued a press release reporting the financial results of the Company for the three and nine months endedSeptember 30, 2017 . A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.

The Company uses “same-store” comparisons to explain the changes in certain performance metrics and line items within its financial statements. Same-store comparisonsare calculated based on hospitals open throughout both the full current and prior periods presented. These comparisons include the financial results of market consolidationtransactions in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company's results of operations.

ITEM 7.01. Regulation FD Disclosure.

See Item 2.02, “Results of Operations and Financial Condition,” above.

In addition, a copy of the supplemental information which will be discussed during the Company’s earnings call at 9:00 a.m. Eastern Time on Friday, October 27, 2017 isattached to this report as Exhibit 99.2 and incorporated herein by reference.

Note Regarding Presentation of Non-GAAP Financial Measures

The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings pershare, leverage ratio, Adjusted EBITDA, and adjusted free cash flow.

The Company is providing adjusted earnings per share from continuing operations attributable to HealthSouth (“adjusted earnings per share”). The Company believes thepresentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to priorperiods given that it excludes the impact of government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stockappreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowanceadjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be non-indicative of itsongoing operating performance. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantlyfrom period to period and may not directly relate to the Company’s ongoing operating performance. Accordingly, they can complicate comparisons of the Company’s results ofoperations across periods and comparisons of the Company’s results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure offinancial performance under generally accepted accounting principles in the United States (“GAAP”) as the items excluded from it are significant components in understanding andassessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, itmay not be comparable as presented to other similarly titled measures of other companies. The Company reconciles adjusted earnings per share to earnings per share in the pressrelease attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.

The leverage ratio referenced therein is defined as the ratio of consolidated total debt to Adjusted EBITDA for the trailing four quarters. The Company believes itsleverage ratio and Adjusted EBITDA are measures of its ability to service its debt and its ability to make capital expenditures. Additionally, the leverage ratio is a standardmeasurement used by investors to gauge the creditworthiness of an institution. The Company’s credit agreement also includes a maximum leverage ratio financial covenant whichallows the Company to deduct up to $100 million of cash on hand from consolidated total debt. The Company reconciles Adjusted EBITDA to net income and to net cash providedby operating activities in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. Adjusted EBITDA for the Company’s reportablesegments is reconciled to net income from continuing operations before income tax expense in the press release attached as Exhibit 99.1 and the supplemental information attachedas Exhibit 99.2.

The Company uses Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important inanalyzing its liquidity because it is the key component of certain material covenants contained within the Company’s credit agreement, which is discussed in more detail in Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” and Note 9, Long-term Debt , to the consolidatedfinancial statements for the year ended December 31, 2016 contained in Exhibit 99.1 to our Current Report on Form 8-K filed on September 18, 2017 (the “ 2016 Form 10-K ”).These covenants are material terms of the credit agreement. Noncompliance with these financial covenants under the credit agreement—its interest coverage ratio and its leverageratio—could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, itwould seek relief from its lenders, which would have some cost to the Company, and such relief might be on terms less favorable to those in the Company’s existing creditagreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such asincurring additional indebtedness, paying common stock dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical tothe Company’s assessment of its liquidity.

In general terms, the credit agreement definition of Adjusted EBITDA, therein referred to as “Adjusted Consolidated EBITDA,” allows the Company to add back toconsolidated net income interest expense, income taxes, and depreciation and amortization and then add back to consolidated net income (1) all unusual or nonrecurring itemsreducing consolidated net income (of which only up to $10 million in a year may be cash expenditures), (2) any losses from discontinued operations and closed locations, (3) costsand expenses, including legal fees and expert witness fees, incurred with respect to litigation associated with stockholder derivative litigation, (4) share-based compensationexpense, and (5) cost and expenses in connection with the Encompass Health rebranding. The Company also subtracts from consolidated net income all unusual or nonrecurringitems to the extent they increase consolidated net income.

The calculation of Adjusted EBITDA under the credit agreement does not require us to deduct net income attributable to noncontrolling interests or gains on disposal ofassets and development activities. It also does not allow us to add back professional fees unrelated to the stockholder derivative litigation, losses on disposal of assets, unusual ornonrecurring cash expenditures in excess of $10 million, and charges resulting from debt transactions and development activities. These items and amounts, in addition to the itemsfalling within the credit agreement’s “unusual or nonrecurring” classification, may occur in future periods, but can vary significantly from period to period and may not directlyrelate to our ongoing operating performance. Accordingly, these items may not be indicative of our ongoing operating performance, so the Adjusted EBITDA calculation presentedhere includes adjustments for them.

Adjusted EBITDA is not a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understandingand assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financingactivities. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented,may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described inNote 1, Summary of Significant Accounting Policies , to the consolidated financial statements accompanying the 2016 Form 10-K .

The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Management believes the presentation of adjusted free cash flowprovides investors an efficient means by which they can evaluate the Company’s capacity to reduce debt, pursue development activities, and return capital to its commonstockholders. The calculation of adjusted free cash flow and a reconciliation of net cash provided by operating activities to adjusted free cash flow are included in the press releaseattached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not beconsidered as an alternative to net cash provided by operating activities. The Company’s definition of adjusted free cash flow is limited and does not represent residual cash flowsavailable for discretionary spending. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to othersimilarly titled measures presented by other companies. See the condensed consolidated statements of cash flows included in the Company's quarterly report on Form 10-Q for thequarterly period ended September 2017 (the “September 2017 Form 10-Q”), when filed, and in the press release attached as Exhibit 99.1 for the GAAP measures of cash flowsfrom operating, investing, and financing activities.

Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact ofitems that are deemed to be non-indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional fees-accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt;adjustments to its income tax provision (such as valuation allowance adjustments and settlements of

income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be non-indicative of its ongoing operating performance.These items are uncertain and will depend on several factors, including industry and market conditions, and could be material to the Company's results computed in accordancewith GAAP.

Forward-Looking Statements

The information contained in the press release and supplemental information includes certain estimates, projections, and other forward-looking statements that involveknown and unknown risks and relate to, among other things, future events, the Company’s business strategy, financial plans, dividend strategies or payments, effective income taxrates, plans to repurchase its debt or equity securities, future financial performance, projected business results or model, ability to return value to its shareholders, projected capitalexpenditures, leverage ratio, acquisition opportunities, and the impact of future legislation or regulation. In some cases, you can identify forward-looking statements by terminologysuch as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or othercomparable terminology. These estimates, projections, and other forward-looking statements are based on assumptions the Company 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 statements will be realized.

All such estimates, projections, and forward-looking statements speak only as of the date hereof. The Company undertakes no duty to publicly update or revise thatinformation.

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking statements in this report, the press release, and supplementalinformation 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 theattached press release and in the 2016 Form 10-K , the September 2017 Form 10-Q, when filed, and in other documents the Company previously filed with the SEC, many of whichare beyond the Company’s control. These factors may cause actual results to differ materially from the views, beliefs, and estimates expressed herein.

ITEM 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number Description99.1 Press release of HealthSouth Corporation, dated October 26, 2017.99.2 Supplemental information provided in connection with the third quarter 2017 earnings call of HealthSouth Corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereuntoduly authorized.

HEALTHSOUTH CORPORATION

By: / S / D OUGLAS E. C OLTHARP Name: Douglas E. Coltharp Title: Executive Vice President and Chief Financial Officer

Dated: October 26, 2017

Exhibit 99.1

Media Contact October 26, 2017Casey Lassiter, 205 447-6410 For Immediate [email protected]

Investor Relations Contact

Crissy Carlisle, 205 970-5860

[email protected]

HealthSouth Reports Results for Third Quarter 2017and Updates Full-Year 2017 Guidance

BIRMINGHAM, Ala. - HealthSouth Corporation (NYSE: HLS), one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-basedpatient care, today reported its results of operations for the third quarter ended September 30, 2017 .

“The third quarter was another strong quarter for HealthSouth with positive trends in volume and pricing, despite disruptions from three hurricanes,” said Mark Tarr, President andChief Executive Officer of HealthSouth. “In addition to the continued good performance and growth of our Company in both segments, we remain focused on developing andleveraging technology to improve patient care and operating efficiencies. These investments include the installation of our rehabilitation-specific electronic clinical informationsystem and the formation of the Post-Acute Innovation Center.”

Consolidated Results

Growth Q3 2017 Q3 2016 Dollars Percent (In Millions, Except per Share Data)Net operating revenues $ 995.6 $ 926.8 $ 68.8 7.4 %Income from continuing operations attributable to HealthSouth per share 0.67 0.64 0.03 4.7 %Adjusted earnings per share 0.66 0.65 0.01 1.5 %Cash flows provided by operating activities 173.8 177.6 (3.8) (2.1)%Adjusted EBITDA 204.6 198.4 6.2 3.1 %Adjusted free cash flow 122.1 139.8 (17.7) (12.7)% Nine Months Ended September 30, 2017 2016 Cash flows provided by operating activities $ 505.8 $ 499.4 $ 6.4 1.3 %Adjusted free cash flow 376.1 394.5 (18.4) (4.7)%

Revenue growth was driven by volume and pricing growth in the inpatient rehabilitation segment and volume growth in the home health and hospice segment.

The increase in income from continuing operations attributable to HealthSouth per share and adjusted earnings per share resulted primarily from increased revenue. Growth in bothearnings per share amounts was negatively impacted by higher stock-based compensation expense and higher depreciation and amortization related to capital investments.

Cash flows provided by operating activities increased in the first nine months of 2017 compared to the first nine months of 2016 primarily due to revenue growth.

1

Exhibit 99.1

Adjusted free cash flow for the first nine months of 2017 compared to the first nine months of 2016 decreased due to cash payments for taxes (due to exhaustion of the Company'sfederal net operating loss in the first quarter of 2017) and increased maintenance capital expenditures in 2017.

See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.

Inpatient Rehabilitation Segment Results

Growth Q3 2017 Q3 2016 Dollars PercentNet operating revenues: (In Millions)Inpatient $ 768.6 $ 724.1 $ 44.5 6.1 %Outpatient and other 26.2 27.6 (1.4) (5.1)%

Total segment revenue $ 794.8 $ 751.7 $ 43.1 5.7 %

(Actual Amounts)Discharges 42,948 41,368 1,580 3.8 %Same-store discharge growth 1.4 %

Net patient revenue per discharge $ 17,896 $ 17,504 $ 392 2.2 % (In Millions)Adjusted EBITDA $ 200.3 $ 198.6 $ 1.7 0.9 %

• Revenue - Revenue growth resulted from volume growth and an increase in net patient revenue per discharge. Discharge growth from new stores resulted from theCompany's joint ventures in Bryan, Texas (August 2016), Broken Arrow, Oklahoma (August 2016), Gulfport, Mississippi (April 2017), Westerville, Ohio (April 2017),and Jackson, Tennessee (July 2017), as well as a wholly owned hospital in Modesto, California (October 2016). Same-store discharge growth of 1.4% in the third quarterof 2017 was negatively impacted 200 to 250 discharges, or 50 to 60 basis points, due to Hurricanes Harvey, Irma, and Maria. Growth in net patient revenue per dischargeprimarily resulted from patient mix. Net patient revenue per discharge in the third quarter of 2016 included the benefit of a retroactive indirect medical education (“IME”)adjustment of approximately $4 million at the former Reliant hospital in Woburn, Massachusetts.

The decrease in outpatient and other revenues primarily was due to the closure of six outpatient programs in the latter half of 2016.

• Adjusted EBITDA - The increase in Adjusted EBITDA for the inpatient rehabilitation segment primarily resulted from revenue growth. Expense ratios in the third quarterof 2017 compared to the third quarter of 2016 were negatively impacted by the aforementioned IME adjustment and $2.5 million in hurricane-related expenses in the thirdquarter of 2017. Salaries and benefits as a percent of net operating revenues were further impacted by salary and benefit cost increases, staffing increases at the formerReliant hospitals, and the ramping up of new stores. Bad debt expense as a percent of net operating revenues decreased from 1.8% in the third quarter of 2016 to 1.4% inthe third quarter of 2017 primarily due to a reduction in new pre-payment claims denials.

2

Home Health and Hospice Segment Results

Growth Q3 2017 Q3 2016 Dollars PercentNet operating revenues: (In Millions)Home health $ 181.2 $ 162.0 $ 19.2 11.9 %Hospice and other 19.6 13.1 6.5 49.6 %

Total segment revenue $ 200.8 $ 175.1 $ 25.7 14.7 %

(Actual Amounts)Admissions 31,471 27,239 4,232 15.5 %Same-store admissions growth 8.8 %

Episodes 53,757 46,866 6,891 14.7 %Same-store episode growth 9.5 %

Revenue per episode $ 3,022 $ 3,032 $ (10) (0.3)% (In Millions)Adjusted EBITDA $ 34.8 $ 25.8 $ 9.0 34.9 %

• Revenue - Revenue growth resulted from strong same-store and new-store volume growth. Same-store admission growth of 8.8% in the third quarter of 2017 wasnegatively impacted 325 to 375 admissions, or 120 to 140 basis points, due to Hurricanes Harvey and Irma. The decrease in revenue per episode resulted fromMedicare reimbursement rate cuts partially offset by changes in patient mix and reconciliation payments attributed to various alternative payment models (e.g., BPCI;ACOs).

The increase in hospice and other revenue primarily resulted from acquisitions completed in 2016.

• Adjusted EBITDA - Growth in Adjusted EBITDA primarily resulted from revenue growth and staffing productivity gains. Adjusted EBITDA for the home health andhospice segment for the third quarter of 2017 included a $0.9 million benefit from the true-up to the purchase price of a 2016 acquisition. Adjusted EBITDA for thethird quarter of 2017 also included approximately $0.3 million in hurricane-related expenses.

Corporate General and Administrative Expenses

Q3 2017 % of Consolidated

Revenue Q3 2016 % of Consolidated

Revenue (In Millions)General and administrative expenses, excluding stock-basedcompensation $ 30.5 3.1% $ 26.0 2.8%

• General and administrative expenses increased as a percent of consolidated revenue primarily due to expenses associated with the Company's rebranding and namechange and TeamWorks clinical collaboration initiative. During the third quarter of 2017, the Company invested $1.5 million in its rebranding and name change and$2.3 million in its TeamWorks clinical collaboration initiative, all of which was included in general and administrative expenses.

3

2017 Guidance

Based on its results for the first nine months of 2017 and its current expectations for the remainder of 2017, the Company is updating its full-year guidance ranges.

Full-Year 2017 Guidance Ranges Previous Guidance Updated Guidance (In Millions, Except Per Share Data)Net operating revenues $3,875 to $3,950 $3,900 to $3,950Adjusted EBITDA $805 to $820 $810 to $820Adjusted earnings per share from continuing operations attributable toHealthSouth $2.64 to $2.73 $2.67 to $2.73

For additional considerations regarding the Company's 2017 guidance ranges, see the supplemental information posted on the Company's website at http://investor.healthsouth.com.See also the “Other Information” section below for an explanation of why the Company does not provide guidance for comparable GAAP measures for Adjusted EBITDA andadjusted earnings per share.

Post-Acute Innovation Center

During the third quarter of 2017, the Company announced the formation of the Post-Acute Innovation Center in collaboration with Cerner Corporation to develop enhanced tools tomanage patients across the continuum of care. Cerner is a global leader in health information technology and collaborated with HealthSouth on the development andimplementation of its clinical information system. The Post-Acute Innovation Center will develop clinical decision support tools designed to more effectively and efficientlymanage patients across multiple care settings. The objective of the Innovation Center is to use diverse data sets from multiple care settings to develop initiatives that facilitateefficient and high-quality patient care, enhanced care coordination, post-acute network performance, and cost management across the post-acute continuum.

Amendment of Credit Agreement Governing Senior Secured Credit Facility

In the third quarter of 2017, the Company amended the credit agreement governing its senior secured credit facility. The amendment increased the size of its revolver from $600million to $700 million, decreased the balance of its term loan facilities by approximately $110 million to $300 million, reduced the interest rate spread by 25 basis points, andextended the agreement's maturity by two years to 2022. As a result of this exercise, the Company recorded a $0.3 million loss on early extinguishment of debt in the third quarterof 2017.

“The restructuring of our credit facility further enhances our liquidity and financial flexibility,” said Doug Coltharp, Executive Vice President and Chief Financial Officer ofHealthSouth. “This action is consistent with our strategy of proactively managing our capital structure to maintain a strong balance sheet.”

Rebranding and Name Change

As a reminder, effective January 1, 2018, HealthSouth Corporation will change its name to Encompass Health Corporation, with a corresponding ticker symbol change from “HLS”to “EHC.” Both of the Company's business segments will transition to the Encompass Health branding.

Earnings Conference Call and Webcast

The Company will host an investor conference call at 9:00 a.m. Eastern Time on Friday, October 27, 2017 to discuss its results for the third quarter of 2017 . For reference duringthe call, the Company will post certain supplemental information athttp://investor.healthsouth.com.

The conference call may be accessed by dialing 877 587-6761 and giving the pass code 87444165 . International callers should dial 706 679-1635 and give the same pass code.Please call approximately ten minutes before the start of the call to ensure you are connected. The conference call will also be webcast live and will be available athttp://investor.healthsouth.com by clicking on an available link.

An on-line replay of the conference call will be available after the live broadcast at http://investor.healthsouth.com.

About HealthSouth

HealthSouth is one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-based patient care in 36 states and Puerto Rico throughits network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies. HealthSouth can be found on the Web at www.healthsouth.com.

Other Information

The information in this press release is summarized and should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,2017 (the “ September 2017 Form 10-Q”), when filed, as well as the Company's Current Report on Form 8-K filed on October 26, 2017 (the “ Q3 Earnings Form 8-K”), to whichthis press release is attached as Exhibit 99.1. In addition, the Company will post supplemental information today on its website athttp://investor.healthsouth.com for reference during its October 27, 2017 earnings call.

The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share,leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are includedbelow or in the Q3 Earnings Form 8-K. Readers are encouraged to review the “Note Regarding Presentation of Non-GAAP Financial Measures” included in the Q3 Earnings Form8-K which provides further explanation and disclosure regarding the Company’s use of these non-GAAP financial measures.

Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of itemsthat are deemed to be outside the control of the Company or otherwise non-indicative of its ongoing operating performance. Such items include government, class action, andrelated settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss onearly extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporateand facility restructurings; and certain other items the Company believes to be non-indicative of its ongoing operations. These items cannot be reasonably predicted and will dependon several factors, including industry and market conditions, and could be material to the Company's results computed in accordance with GAAP.

However, the following reasonably estimable GAAP measures for 2017 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures couldbe reasonably predicted:

• Provision for doubtful accounts - estimate of 1.6% to 1.8% of net operating revenues

• Interest expense and amortization of debt discounts and fees - estimate of $155 million to $160 million• Amortization of debt-related items - approximately $10 million

The Q3 Earnings Form 8-K and, when filed, the September 2017 Form 10-Q can be found on the Company's website athttp://investor.healthsouth.com and the SEC's website at www.sec.gov.

4

HealthSouth Corporation and SubsidiariesCondensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended September

30, Nine Months Ended September

30, 2017 2016 2017 2016 (In Millions)Net operating revenues $ 995.6 $ 926.8 $ 2,951.7 $ 2,757.3Less: Provision for doubtful accounts (12.6) (14.8) (42.7) (46.7)

Net operating revenues less provision for doubtful accounts 983.0 912.0 2,909.0 2,710.6Operating expenses:

Salaries and benefits 542.1 497.4 1,600.0 1,469.6Other operating expenses 137.6 126.3 397.2 367.0Occupancy costs 18.6 17.6 54.8 53.5Supplies 36.5 34.8 110.6 104.2General and administrative expenses 39.7 30.3 128.6 96.6Depreciation and amortization 46.2 43.5 137.2 128.8Professional fees—accounting, tax, and legal — — — 1.9

Total operating expenses 820.7 749.9 2,428.4 2,221.6Loss on early extinguishment of debt 0.3 2.6 10.7 7.4Interest expense and amortization of debt discounts and fees 36.8 42.5 118.5 130.5Other income (1.0) (0.8) (2.9) (2.1)Equity in net income of nonconsolidated affiliates (2.1) (2.5) (6.2) (7.3)

Income from continuing operations before income tax expense 128.3 120.3 360.5 360.5Provision for income tax expense 43.1 42.1 111.4 124.2

Income from continuing operations 85.2 78.2 249.1 236.3Loss from discontinued operations, net of tax (0.1) (0.1) (0.2) (0.3)

Net income 85.1 78.1 248.9 236.0Less: Net income attributable to noncontrolling interests (19.2) (16.4) (53.2) (53.7)

Net income attributable to HealthSouth $ 65.9 $ 61.7 $ 195.7 $ 182.3

(Continued) 5

HealthSouth Corporation and SubsidiariesCondensed Consolidated Statements of Operations (Continued)

(Unaudited)



30, 2017 2016 2017 2016 (In Millions, Except Per Share Data)Weighted average common shares outstanding:

Basic 97.8 89.1 92.3 89.3

Diluted 99.0 99.4 99.1 99.5

Earnings per common share: Basic earnings per share attributable to HealthSouth common shareholders:

Continuing operations $ 0.67 $ 0.69 $ 2.11 $ 2.03Discontinued operations — — — —

Net income $ 0.67 $ 0.69 $ 2.11 $ 2.03

Diluted earnings per share attributable to HealthSouth common shareholders: Continuing operations $ 0.67 $ 0.64 $ 2.08 $ 1.90Discontinued operations — — — —

Net income $ 0.67 $ 0.64 $ 2.08 $ 1.90

Cash dividends per common share $ 0.25 $ 0.24 $ 0.73 $ 0.70

Amounts attributable to HealthSouth common shareholders: Income from continuing operations $ 66.0 $ 61.8 $ 195.9 $ 182.6Loss from discontinued operations, net of tax (0.1) (0.1) (0.2) (0.3)

Net income attributable to HealthSouth $ 65.9 $ 61.7 $ 195.7 $ 182.3

6

HealthSouth Corporation and SubsidiariesCondensed Consolidated Balance Sheets

(Unaudited)

September 30,

2017 December 31,

2016 (In Millions)

Assets Current assets: Cash and cash equivalents $ 67.6 $ 40.5Accounts receivable, net of allowance for doubtful accounts of $58.5 in 2017; $53.9 in 2016 441.6 443.8Other current assets 178.2 170.2

Total current assets 687.4 654.5Property and equipment, net 1,482.3 1,391.8Goodwill 1,971.7 1,927.2Intangible assets, net 405.1 411.3Deferred income tax assets 91.6 75.8Other long-term assets 245.3 221.3

Total assets $ 4,883.4 $ 4,681.9

Liabilities and Shareholders’ Equity Current liabilities: Current portion of long-term debt $ 31.1 $ 37.1Accounts payable 81.8 68.3Accrued expenses and other current liabilities 398.3 370.2

Total current liabilities 511.2 475.6Long-term debt, net of current portion 2,591.3 2,979.3Other long-term liabilities 186.4 160.0

3,288.9 3,614.9Commitments and contingencies Redeemable noncontrolling interests 221.3 138.3Shareholders’ equity: HealthSouth shareholders’ equity 1,136.4 735.9Noncontrolling interests 236.8 192.8

Total shareholders’ equity 1,373.2 928.7

Total liabilities and shareholders’ equity $ 4,883.4 $ 4,681.9

7

HealthSouth Corporation and SubsidiariesCondensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30, 2017 2016 (In Millions)Cash flows from operating activities: Net income $ 248.9 $ 236.0Loss from discontinued operations, net of tax 0.2 0.3Adjustments to reconcile net income to net cash provided by operating activities—

Provision for doubtful accounts 42.7 46.7Depreciation and amortization 137.2 128.8Loss on early extinguishment of debt 10.7 7.4Equity in net income of nonconsolidated affiliates (6.2) (7.3)Distributions from nonconsolidated affiliates 6.6 5.9Stock-based compensation 37.9 17.4Deferred tax expense 51.3 110.6Other, net 9.8 11.7Change in assets and liabilities, net of acquisitions—

Accounts receivable (54.2) (75.7)Other assets (7.4) (4.4)Accounts payable 6.1 1.9Accrued payroll 3.1 8.7Accrued interest payable 7.3 6.0Other liabilities 12.5 11.8Premium paid on redemption of bonds — (5.8)

Net cash used in operating activities of discontinued operations (0.7) (0.6)Total adjustments 256.7 263.1

Net cash provided by operating activities 505.8 499.4

(Continued) 8

HealthSouth Corporation and SubsidiariesCondensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

Nine Months Ended September 30, 2017 2016 (In Millions)Cash flows from investing activities:

Purchases of property and equipment (155.7) (113.9)Additions to capitalized software costs (14.6) (17.5)Acquisitions of businesses, net of cash acquired (36.6) (19.6)Net change in restricted cash (9.9) (7.1)Other, net 7.6 1.8Net cash used in investing activities (209.2) (156.3)

Cash flows from financing activities: Principal payments on debt, including pre-payments (125.4) (195.2)Borrowings on revolving credit facility 241.3 260.0Payments on revolving credit facility (255.3) (240.0)Repurchases of common stock, including fees and expenses (38.1) (24.1)Dividends paid on common stock (67.0) (62.4)Proceeds from exercising stock warrants 26.6 —Distributions paid to noncontrolling interests of consolidated affiliates (38.3) (49.5)Taxes paid on behalf of employees for shares withheld (19.8) (9.9)Other, net 6.5 (7.2)Net cash used in financing activities (269.5) (328.3)

Increase in cash and cash equivalents 27.1 14.8Cash and cash equivalents at beginning of period 40.5 61.6

Cash and cash equivalents at end of period $ 67.6 $ 76.4

Supplemental schedule of noncash financing activity: Conversion of convertible debt $ 319.4 $ —

9

HealthSouth Corporation and SubsidiariesSupplemental Information

Earnings Per Share

Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (In Millions, Except Per Share Data)Adjusted EBITDA $ 204.6 $ 198.4 $ 614.9 $ 594.8Interest expense and amortization of debt discounts and fees (36.8) (42.5) (118.5) (130.5)Depreciation and amortization (46.2) (43.5) (137.2) (128.8)Stock-based compensation expense (9.2) (4.3) (37.9) (17.4)Noncash loss on disposal of assets (3.0) (1.6) (3.3) (2.0)

109.4 106.5 318.0 316.1Certain items non-indicative of ongoing operations: Loss on early extinguishment of debt (0.3) (2.6) (10.7) (7.4)Professional fees—accounting, tax, and legal — — — (1.9)

Pre-tax income 109.1 103.9 307.3 306.8Income tax expense (1) (43.1) (42.1) (111.4) (124.2)

Income from continuing operations (2) $ 66.0 $ 61.8 $ 195.9 $ 182.6

Basic shares (3) 97.8 89.1 92.3 89.3

Diluted shares 99.0 99.4 99.1 99.5

Basic earnings per share (2) $ 0.67 $ 0.69 $ 2.11 $ 2.03

Diluted earnings per share (2) $ 0.67 $ 0.64 $ 2.08 $ 1.90

(1) Current income tax expense for the three months ended September 30, 2017 and 2016 was $36.0 million and $4.6 million , respectively. Current income tax expense forthe nine months ended September 30, 2017 and 2016 was $60.1 million and $13.6 million, respectively.

(2) Income from continuing operations attributable to HealthSouth.(3) Increased basic share count in 2017 resulted from the Company's exercise of its early redemption option on its 2.0% Convertible Senior Subordinated Notes in the

second quarter of 2017

10


Adjusted Earnings Per Share

Q3 9 Months 2017 2016 2017 2016 Earnings per share, as reported $ 0.67 $ 0.64 $ 2.08 $ 1.90Adjustments, net of tax: Professional fees—accounting, tax, and legal — — — 0.01Mark-to-market adjustments for stock appreciation rights (0.01) (0.01) 0.08 (0.01)Sale of hospital — — — (0.01)Loss on early extinguishment of debt (1) — 0.02 — 0.04Income tax adjustments (2) — — (0.10) —

Adjusted earnings per share (3) $ 0.66 $ 0.65 $ 2.07 $ 1.95

(1) The interest and amortization and the loss on early extinguishment of debt related to the convertible senior subordinated notes must be added to income from continuingoperations when calculating diluted earnings per share because the debt was assumed to have been converted at the beginning of the period, and the applicable shareswere included in the diluted share count.

(2) New guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” requires entitiesto record all of the tax effects related to share-based payments at settlement (or expiration) through the incomestatement. Historically, HealthSouth recorded such tax effects to equity.

(3) Adjusted EPS may not sum due to rounding.

11



For the Three Months Ended September 30, 2017 Adjustments

As Reported

Mark-to-MarketAdjustment for

Stock AppreciationRights

Income TaxAdjustments (1)

Loss on EarlyExtinguishment

of Debt As Adjusted (In Millions, Except Per Share Amounts)Adjusted EBITDA (2) $ 204.6 $ — $ — $ — $ 204.6Depreciation and amortization (46.2) — — — (46.2)Loss on early extinguishment of debt (0.3) — — 0.3 —Interest expense and amortization of debt discounts and fees (36.8) — — — (36.8)Stock-based compensation (9.2) (1.0) — — (10.2)Loss on disposal of assets (3.0) — — — (3.0)

Income from continuing operations before income tax expense 109.1 (1.0) — 0.3 108.4Provision for income tax expense (43.1) 0.4 (0.4) (0.1) (43.2)

Income from continuing operations attributable toHealthSouth $ 66.0 $ (0.6) $ (0.4) $ 0.2 $ 65.2

Add: Interest, amortization, and loss on extinguishment ofconvertible debt, net of tax — —

Numerator for diluted earnings per share $ 66.0 $ 65.2

Diluted earnings per share from continuing operations, asreported (3) $ 0.67 $ (0.01) $ — $ — $ 0.66

Diluted shares used in calculation 99.0

(1) New guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” requires entities to record all of the tax effects related to share-basedpayments at settlement (or expiration) through the income statement. Historically, HealthSouth recorded such tax effects to equity.

(2) Reconciliation to GAAP provided on page 17(3) Adjusted EPS may not sum across due to rounding.

12



For the Three Months Ended September 30, 2016 Adjustments

As

Reported




of Debt As

Adjusted (In Millions, Except Per Share Amounts)Adjusted EBITDA (1) $ 198.4 $ — $ — $ 198.4Depreciation and amortization (43.5) — — (43.5)Loss on early extinguishment of debt (2.6) — 2.6 —Interest expense and amortization of debt discounts and fees (42.5) — — (42.5)Stock-based compensation (4.3) (1.8) — (6.1)Loss on disposal of assets (1.6) — — (1.6)

Income from continuing operations before income tax expense 103.9 (1.8) 2.6 104.7Provision for income tax expense (42.1) 0.7 (1.0) (42.4)

Income from continuing operations attributable to HealthSouth $ 61.8 $ (1.1) $ 1.6 $ 62.3Add: Interest on convertible debt, net of tax 2.4 2.4


Diluted earnings per share from continuing operations (2) $ 0.64 $ (0.01) $ 0.02 $ 0.65



13



For the Nine Months Ended September 30, 2017 Adjustments

As

Reported




of Debt Income Tax

Adjustments (1) As

Adjusted (In Millions, Except Per Share Amounts)Adjusted EBITDA (2) $ 614.9 $ — $ — $ — $ 614.9Depreciation and amortization (137.2) — — — (137.2)Loss on early extinguishment of debt (10.7) — 0.3 — (10.4)Interest expense and amortization of debt discounts and fees (118.5) — — — (118.5)Stock-based compensation (37.9) 13.9 — — (24.0)Loss on disposal of assets (3.3) — — — (3.3)

Income from continuing operations before income tax expense 307.3 13.9 0.3 — 321.5Provision for income tax expense (111.4) (5.6) (0.1) (10.4) (127.5)

Income from continuing operations attributable toHealthSouth $ 195.9 $ 8.3 $ 0.2 $ (10.4) $ 194.0

Add: Interest, amortization, and loss on extinguishment ofconvertible debt, net of tax 10.8 10.8


Diluted earnings per share from continuing operations, asreported (3) $ 2.08 $ 0.08 $ — $ (0.10) $ 2.07


(1) New guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” requires entities to record all of the tax effects related to share-basedpayments at settlement (or expiration) through the income statement. Historically, HealthSouth recorded such tax effects to equity.


14



For the Nine Months Ended September 30, 2016 Adjustments

As

Reported

ProfessionalFees —

Accounting,Tax, and Legal

Mark-to-Market

Adjustment forStock

AppreciationRights


of Debt Sale of

Hospital As

Adjusted (In Millions, Except Per Share Amounts)Adjusted EBITDA (1) $ 594.8 $ — $ — $ — $ — $ 594.8Depreciation and amortization (128.8) — — — — (128.8)Professional fees—accounting, tax, and legal (1.9) 1.9 — — — —Loss on early extinguishment of debt (7.4) — — 7.4 — —Interest expense and amortization of debt discounts and fees (130.5) — — — — (130.5)Stock-based compensation (17.4) — (1.4) — — (18.8)Loss on disposal of assets (2.0) — — — (0.9) (2.9)

Income from continuing operations before income taxexpense 306.8 1.9 (1.4) 7.4 (0.9) 313.8

Provision for income tax expense (124.2) (0.8) 0.5 (3.0) 0.4 (127.1)Income from continuing operations attributable to

HealthSouth $ 182.6 $ 1.1 $ (0.9) $ 4.4 $ (0.5) $ 186.7Add: Interest on convertible debt, net of tax 7.2 7.2


Diluted earnings per share from continuing operations (2) $ 1.90 $ 0.01 $ (0.01) $ 0.04 $ (0.01) $ 1.95



15


Reconciliation of Net Income to Adjusted EBITDA



30, 2017 2016 2017 2016 (In Millions)Net income $ 85.1 $ 78.1 $ 248.9 $ 236.0Loss from discontinued operations, net of tax, attributable to HealthSouth 0.1 0.1 0.2 0.3Provision for income tax expense 43.1 42.1 111.4 124.2Interest expense and amortization of debt discounts and fees 36.8 42.5 118.5 130.5Professional fees—accounting, tax, and legal — — — 1.9Loss on early extinguishment of debt 0.3 2.6 10.7 7.4Net noncash loss on disposal of assets 3.0 1.6 3.3 2.0Depreciation and amortization 46.2 43.5 137.2 128.8Stock-based compensation expense 9.2 4.3 37.9 17.4Net income attributable to noncontrolling interests (19.2) (16.4) (53.2) (53.7)

Adjusted EBITDA $ 204.6 $ 198.4 $ 614.9 $ 594.8

Reconciliation of Segment Adjusted EBITDA to Income from Continuing Operations Before Income Tax Expense



30, Year EndedDecember 31, 2016 2017 2016 2017 2016

(In Millions)Total segment Adjusted EBITDA $ 235.1 $ 224.4 $ 705.6 $ 674.0 $ 899.6General and administrative expenses (39.7) (30.3) (128.6) (96.6) (133.4)Depreciation and amortization (46.2) (43.5) (137.2) (128.8) (172.6)Loss on disposal of assets (3.0) (1.6) (3.3) (2.0) (0.7)Professional fees—accounting, tax, and legal — — — (1.9) (1.9)Loss on early extinguishment of debt (0.3) (2.6) (10.7) (7.4) (7.4)Interest expense and amortization of debt discounts and fees (36.8) (42.5) (118.5) (130.5) (172.1)Net income attributable to noncontrolling interests 19.2 16.4 53.2 53.7 70.5

Income from continuing operations before income tax expense $ 128.3 $ 120.3 $ 360.5 $ 360.5 $ 482.0

16


Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

Three Months Ended September30,

Nine Months Ended September 30,

Year Ended December 31,

2017 2016 2017 2016 2016 2015 (In Millions)Net cash provided by operating activities $ 173.8 $ 177.6 $ 505.8 $ 499.4 $ 634.4 $ 502.0Provision for doubtful accounts (12.6) (14.8) (42.7) (46.7) (61.2) (47.2)Professional fees—accounting, tax, and legal — — — 1.9 1.9 3.0Interest expense and amortization of debt discounts and fees 36.8 42.5 118.5 130.5 172.1 142.9Equity in net income of nonconsolidated affiliates 2.1 2.5 6.2 7.3 9.8 8.7Net income attributable to noncontrolling interests in continuingoperations (19.2) (16.4) (53.2) (53.7) (70.5) (69.7)

Amortization of debt-related items (1.0) (3.5) (7.7) (10.3) (13.8) (14.3)Distributions from nonconsolidated affiliates (2.2) (2.9) (6.6) (5.9) (8.5) (7.7)Current portion of income tax expense 36.0 4.6 60.1 13.6 31.0 14.8Change in assets and liabilities (9.8) 6.4 32.6 51.7 91.3 129.9Net premium paid on bond transactions — 1.9 — 5.8 5.8 3.9Net cash used in operating activities of discontinued operations 0.1 0.1 0.7 0.6 0.7 0.7Transaction costs — — — — — 12.3Other 0.6 0.4 1.2 0.6 0.6 3.2

Consolidated Adjusted EBITDA $ 204.6 $ 198.4 $ 614.9 $ 594.8 $ 793.6 $ 682.5

17


Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow

Three Months Ended September30,

Nine Months Ended September30,

2017 2016 2017 2016 (In Millions)Net cash provided by operating activities $ 173.8 $ 177.6 $ 505.8 $ 499.4Impact of discontinued operations 0.1 0.1 0.7 0.6Net cash provided by operating activities of continuing operations 173.9 177.7 506.5 500.0

Capital expenditures for maintenance (37.6) (23.9) (92.1) (64.5)Distributions paid to noncontrolling interests of consolidated affiliates (14.2) (15.9) (38.3) (49.5)Items non-indicative of ongoing operations: Cash paid for professional fees—accounting, tax, and legal — — — 1.9Transaction costs and related assumed liabilities — — — 0.8Net premium on bond issuance/repayment — 1.9 — 5.8

Adjusted free cash flow $ 122.1 $ 139.8 $ 376.1 $ 394.5

For the three months ended September 30, 2017 , net cash used in investing activities was $77.6 million and primarily resulted from capital expenditures and acquisitions ofbusinesses. Net cash used in financing activities during the three months ended September 30, 2017 was $99.7 million and primarily resulted from net debt payments, cashdividends paid on common stock, repurchases of common stock, and distributions paid to noncontrolling interests of consolidated affiliates.

For the three months ended September 30, 2016 , net cash used in investing activities was $50.7 million and primarily resulted from capital expenditures. Net cash used in financingactivities during the three months ended September 30, 2016 was $120.7 million and primarily resulted from the redemption of $76 million of 7.75% Senior Notes due 2022 inSeptember 2016, cash dividends paid on common stock, and distributions paid to noncontrolling interests of consolidated affiliates.

For the nine months ended September 30, 2017 , net cash used in investing activities was $209.2 million and primarily resulted from capital expenditures and acquisitions ofbusinesses. Net cash used in financing activities during the nine months ended September 30, 2017 was $269.5 million and primarily resulted from net debt payments, cashdividends paid on common stock, distributions paid to noncontrolling interests of consolidated affiliates, and repurchases of common stock.

For the nine months ended September 30, 2016 , net cash used in investing activities was $156.3 million and primarily resulted from capital expenditures and acquisitions ofbusinesses. Net cash used in financing activities during the nine months ended September 30, 2016 was $328.3 million and primarily resulted from net debt payments, including theredemptions of $176 million of 7.75% Senior Notes due 2022, cash dividends on common stock, distributions paid to noncontrolling interests of consolidated affiliates, andrepurchases of common stock.

18

HealthSouth Corporation and SubsidiariesForward-Looking Statements

Statements contained in this press release which are not historical facts, such as those relating to financial guidance and assumptions, balance sheet and cash flow plans, andanticipated acquisitions, are forward-looking statements. In addition, HealthSouth, through its senior management, may from time to time make forward-looking public statementsconcerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date hereof, and HealthSouth undertakes no duty topublicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarilyestimates based upon current information, involve a number of risks and uncertainties, and relate to, among other things, future events, HealthSouth's plan to repurchase its debtor equity securities, dividend strategies, effective income tax rates, HealthSouth's business strategy, its financial plans, its future financial performance, its projected businessresults or model, its ability to return value to shareholders, its projected capital expenditures, its leverage ratio, its acquisition opportunities, and the impact of future legislation orregulation. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible toidentify all such factors, factors which could cause actual events or results to differ materially from those estimated by HealthSouth include, but are not limited to, the Company'songoing rebranding and name change initiative and the impact on HealthSouth's common stock price and existing operations, including the Company's ability to attract patientreferrals to its hospitals as well as the associated costs with the rebranding; the price of HealthSouth's common stock as it affects the Company's willingness and ability torepurchase shares and the financial and accounting effects of any repurchases; any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings involvingHealthSouth, including its pending DOJ and HHS-OIG investigations and any matters related to yet undiscovered issues, if any, in acquired operations; HealthSouth's ability toattract and retain key management personnel, including as a part of executive management succession planning; any adverse effects on HealthSouth's stock price resulting fromthe integration of acquired operations; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of HealthSouth's informationsystems, including unauthorized access to or theft of patient, business associate, or other sensitive information or inability to provide patient care because of system unavailabilityas well as unforeseen issues, if any, related to integration of acquired systems; the ability to successfully integrate acquired operations, including realization of anticipated taxbenefits, revenues, and cost savings, minimizing the negative impact on margins arising from the changes in staffing and other operating practices, and avoidance of unforeseenexposure to liabilities; HealthSouth's ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with its growthstrategy; changes, delays in (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for HealthSouth's services bygovernmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels, including as part of national healthcare reformand deficit reduction; competitive pressures in the healthcare industry and HealthSouth's response thereto; HealthSouth's ability to obtain and retain favorable arrangements withthird-party payors; HealthSouth's ability to control costs, particularly labor and employee benefit costs, including group medical expenses; adverse effects resulting from coveragedeterminations made by Medicare Administrative Contractors regarding its Medicare reimbursement claims and lengthening delays in HealthSouth's ability to recover improperlydenied claims through the administrative appeals process on a timely basis; HealthSouth's ability to adapt to changes in the healthcare delivery system, including involvement incoordinated care initiatives or programs that may arise with its referral sources; HealthSouth's ability to attract and retain nurses, therapists, and other healthcare professionalsin a highly competitive environment with often severe staffing shortages and the impact on HealthSouth's labor expenses from potential union activity and staffing shortages;general conditions in the economy and capital markets, including any crisis resulting from uncertainty in the sovereign debt market; HealthSouth's ability to maintain itsoperations, including adequate supplies, utilities, and staffing, during times of significant disaster disruption; the increase in the costs of defending and insuring against allegedprofessional liability claims and HealthSouth's ability to predict the estimated costs related to such claims; and other factors which may be identified from time to time inHealthSouth's SEC filings and other public announcements, including HealthSouth's Form 10-K for the year ended December 31, 2016 and Form 10-Q for the quarters endedMarch 31, 2017, June 30, 2017, and September 30, 2017 , when filed.

19

Third Quarter 2017 Earnings Call October 27, 2017 Supplemental Information

The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect HealthSouth’s current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, capital expenditures, acquisition and other development activities, cyber security, dividend strategies, repurchases of securities, effective tax rates, financial performance, financial assumptions, business model, balance sheet and cash flow plans, and shareholder value-enhancing transactions. These estimates, projections and other forward-looking information are based on assumptions HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual events or results, and those differences may be material. There can be no assurance 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, 2016, the form 10-Q for the quarters ended March 31, 2017, June 30, 2017, and September 30, 2017, when filed, and in other documents HealthSouth previously filed with the SEC, many of which are beyond HealthSouth’s control, that may cause actual events or 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, including Adjusted EBITDA, leverage ratios, adjusted earnings per share, and adjusted free cash flow. 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 inthe United States. HealthSouth’s Form 8-K, dated October 26, 2017, to which the following supplemental information is attached as Exhibit 99.2, provides further explanation and disclosure regarding HealthSouth’s use of non-GAAP financial measures and should be read in conjunction with this supplemental information. Forward-Looking Statements

3 Table of Contents Q3 2017 Summary................................................................................................................................................. 4-5 Rebranding and Name Change Initiative ............................................................................................................... 6 IRF-Home Health Clinical Collaboration ................................................................................................................ 7 Inpatient Rehabilitation Segment ........................................................................................................................... 8-9 Home Health & Hospice Segment ......................................................................................................................... 10-11 Consolidated Adjusted EBITDA ............................................................................................................................. 12 Earnings per Share ................................................................................................................................................ 13-14 Adjusted Free Cash Flow....................................................................................................................................... 15 Guidance................................................................................................................................................................ 16-17 Adjusted Free Cash Flow and Tax Assumptions.................................................................................................... 18 Free Cash Flow Priorities....................................................................................................................................... 19 Appendix Map of Locations.................................................................................................................................................... 21 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment.......................................................................... 22 Expansion Activity .................................................................................................................................................. 23 Business Outlook ................................................................................................................................................... 24-26 Debt Schedule and Maturity Profile ....................................................................................................................... 27-28 New-Store/Same-Store IRF Growth ...................................................................................................................... 29 Payment Sources (Percent of Revenues).............................................................................................................. 30 Inpatient Rehabilitation Operational and Labor Metrics ......................................................................................... 31 Home Health & Hospice Operational Metrics ........................................................................................................ 32 Share Information.................................................................................................................................................. 33 Segment Operating Results................................................................................................................................... 34-36 Reconciliations to GAAP........................................................................................................................................ 37-45 End Notes .............................................................................................................................................................. 46-48

4 Q3 2017 Summary Q3 Growth (In Millions) Q3 2017 Q3 2016 Dollars Percent HealthSouth Consolidated Net operating revenues $ 995.6 $ 926.8 $ 68.8 7.4% Adjusted EBITDA $ 204.6 $ 198.4 $ 6.2 3.1% Inpatient Rehabilitation Segment Net operating revenues $ 794.8 $ 751.7 $ 43.1 5.7% Adjusted EBITDA $ 200.3 $ 198.6 $ 1.7 0.9% Home Health and Hospice Segment Net operating revenues $ 200.8 $ 175.1 $ 25.7 14.7% Adjusted EBITDA $ 34.8 $ 25.8 $ 9.0 34.9% Major takeaways: u Strong revenue growth in both segments Ÿ IRF growth driven by volume and pricing ü Discharge growth of 3.8%; same store = 1.4% (negatively impacted ~50 to 60 basis points by Q3 2017 hurricanes) ü Net revenue per discharge increase of 2.2% Ÿ Home health and hospice growth driven by volume ü Admissions growth of 15.5%; same store = 8.8% (negatively impacted ~120 to 140 basis points by Q3 2017 hurricanes) ü Revenue per episode decrease of 0.3% u Consolidated Adjusted EBITDA of $204.6 million, an increase of 3.1% (inclusive of ~$3 million in expenses related to Q3 2017 hurricanes) u Adjusted EPS of $0.66 per diluted share, an increase of 1.5% - see pages 13 and 14. u YTD Adjusted free cash flow of $376.1 million - see pages 15 and 18. Reconciliations to GAAP provided on pages 37-45

5 Q3 2017 Summary (cont.) u Expansion Activity (see page 23) Ÿ Began operating a new 48-bed inpatient rehabilitation hospital with West Tennessee Healthcare in Jackson, TN Ÿ Entered into an agreement with University Medical Center Health System to build a 40-bed inpatient rehabilitation hospital in Lubbock, TX (expect to begin construction in spring 2018) Ÿ Continued development of six previously announced IRF projects (two are joint ventures) Ÿ Expanded existing hospitals by 59 beds Ÿ Acquired six home health locations in Illinois, Indiana, Arizona, and Ohio u Announced Formation of Post-Acute Innovation Center in Collaboration with Cerner Ÿ Will develop clinical decision support tools designed to more effectively and efficiently manage patients across multiple care settings u Balance Sheet Ÿ Leverage ratio of 3.2x at end of third quarter Ÿ Amended credit agreement governing senior secured credit facility ü Increased size of revolver from $600 million to $700 million ü Decreased the balance of term loan facilities by ~$110 million to $300 million ü Reduced interest rate spread by 25 basis points ü Extended maturity by two years to 2022 u Shareholder Distributions Ÿ Repurchased 461,068 shares for $20.0 million in Q3 2017 ü Year-to-date 2017 repurchases of 919,646 shares for $38.1 million Ÿ Paid quarterly cash dividend of $0.24 per share in July 2017 Ÿ Declared a $0.25 per share quarterly cash dividend in July 2017 (paid in October 2017)

6 Rebranding and Name Change u Both business segments — inpatient rehabilitation and home health and hospice — will transition to the Encompass Health branding by the end of 2019. Ÿ Rebranding and name change reinforce the Company’s existing strategy and position as an integrated provider of inpatient and home-based care. Ÿ Effective as of January 1, 2018, HealthSouth Corporation will change its name to Encompass Health Corporation, with a corresponding ticker symbol change from “HLS” to “EHC.” Ÿ Total rebranding investment estimated to be ~$25 million to $30 million, to be incurred between 2017 and 2019. ü ~$7 million to $10 million expected to be incurred in 2017 Ÿ ~$6 million to $8 million expected to be operating expenses (included in corporate general and administrative expenses line item) Ÿ ~$1 million to $2 million expected to be capital expenditures

7 IRF-Home Health Clinical Collaboration (All Payors) Q3 2016 Q3 2017 9,959 10,917 3,639 4,395 26.8% Collaboration Rate 28.7% Collaboration Rate HealthSouth IRF Discharges to Non-Encompass Home Health HealthSouth IRF Discharges to Encompass Home Health u As of September 30, 2017, 60% of HealthSouth’s IRFs were located within overlap markets.* u The clinical collaboration rate with HealthSouth’s IRFs increased by 190 basis points in Q3 2017 compared to Q3 2016. u The Company’s clinical collaboration rate goal for overlap markets is 35% to 40% within the next three years. u TeamWorks clinical collaboration initiative is a process to identify and standardize best practices for integrated patient care. Ÿ Initiative launched in February 2017 Ÿ Began piloting redesigned clinical collaboration process in July 2017 Ÿ Full implementation targeted by end of 2017 Overlap Markets* * Overlap markets are defined as a HealthSouth IRF located within a 30-mile radius of an Encompass location.

8 Inpatient Rehabilitation Segment - Revenue Q3 Q3 Favorable/ ($millions) 2017 2016 (Unfavorable) Net operating revenues: Inpatient $ 768.6 $ 724.1 6.1% Outpatient and other 26.2 27.6 (5.1%) Total segment revenue $ 794.8 $ 751.7 5.7% (Actual Amounts) Discharges 42,948 41,368 3.8% Same-store discharge growth 1.4% Net patient revenue / discharge $ 17,896 $ 17,504 2.2% u Revenue growth was driven by volume and pricing growth. Ÿ New-store discharge growth resulted from joint ventures in Bryan, TX (August 2016), Broken Arrow, OK (August 2016), Gulfport, MS (April 2017), Westerville, OH (April 2017), and Jackson, TN (July 2017) and a wholly owned hospital in Modesto, CA (October 2016). Ÿ Same-store discharge growth of 1.4% in Q3 2017 was negatively impacted 200 to 250 discharges, or 50 to 60 basis points, due to Hurricanes Harvey, Irma, and Maria. Ÿ Growth in revenue per discharge primarily resulted from patient mix. Q3 2016 revenue per discharge included the benefit of a retroactive indirect medical education(1) (“IME”) adjustment of ~$4 million at the former Reliant hospital in Woburn, MA. u Outpatient and other revenue decrease primarily was due to the closure of six outpatient programs in the latter half of 2016. Refer to pages 46-48 for end notes.

9 Inpatient Rehabilitation Segment - Adjusted EBITDA Q3 % of Revenue Q3 % of Revenue($millions) 2017 2016 Net operating revenues $ 794.8 $ 751.7 Less: Provision for doubtful accounts (11.3) 1.4% (13.7) 1.8% Net operating revenues less provision for doubtful accounts 783.5 738.0 Operating expenses: Salaries and benefits (403.2) 50.7% (371.2) 49.4% Other operating expenses(a) (117.4) 14.8% (110.1) 14.6% Supplies (33.1) 4.2% (31.9) 4.2% Occupancy costs (15.7) 2.0% (15.0) 2.0% Hospital operating expenses (166.2) 20.9% (157.0) 20.9% Other income 1.0 0.8 Equity in nonconsolidated affiliates 1.9 2.3 Noncontrolling interests (16.7) (14.3) Segment Adjusted EBITDA $ 200.3 $ 198.6 Percent change 0.9% In arriving at Adjusted EBITDA, the following was excluded: (a) Loss on disposal of assets* $ 3.1 $ 1.6 Segment Adjusted EBITDA for the quarter of $200.3 million - Salaries and benefits as a percent of revenue were further impacted by salary and benefit cost increases, staffing increases at the former Reliant hospitals, and the ramping up of new stores. - Bad debt expense as a percent of revenue decreased primarily due to a reduction in new pre-payment claims denials (see page 22). - Q3 2017 expense ratios compared to Q3 2016 were negatively impacted by the ~$4 million IME(1) adjustment in Q3 2016 and $2.5 million in hurricane- related expenses in Q3 2017. * Loss on disposal of assets in Q3 2017 includes $1.4 million related to hurricane-related property losses at HealthSouth Rehabilitation Hospital The Vintage. Reconciliations to GAAP provided on pages 37-45; Refer to pages 46-48 for end notes.

10 Home Health and Hospice Segment - Revenue Q3 Q3 Favorable/ ($millions) 2017 2016 (Unfavorable) Net operating revenues: Home health revenue $ 181.2 $ 162.0 11.9 % Hospice revenue 19.6 13.1 49.6 % Total segment revenue $ 200.8 $ 175.1 14.7 % (Actual Amounts) Admissions 31,471 27,239 15.5 % Same-store admissions growth 8.8 % Episodes 53,757 46,866 14.7 % Same-store episode growth 9.5 % Revenue per episode $ 3,022 $ 3,032 (0.3)% u Revenue growth was driven by strong same-store and new-store volume growth. Ÿ Same-store admission growth of 8.8% in Q3 2017 was negatively impacted 325 to 375 admissions, or 120 to 140 basis points, due to Hurricanes Harvey and Irma. Ÿ Approximately 90 basis points of same-store admissions growth resulted from clinical collaboration with HealthSouth’s IRFs. u Decrease in revenue per episode resulted from Medicare reimbursement rate cuts partially offset by changes in patient mix and reconciliation payments attributed to various alternative payment models (e.g., BPCI; ACOs). u Hospice revenue increase primarily was due to acquisitions in 2016.

11 Q3 % of Revenue Q3 % of Revenue($millions) 2017 2016 Net operating revenues $ 200.8 $ 175.1 Less: Provision for doubtful accounts (1.3) 0.6% (1.1) 0.6% Net operating revenues less provision for doubtful accounts 199.5 174.0 Operating expenses:(a) Cost of services (93.5) 46.6% (86.8) 49.6% Support and overhead costs (68.9) 34.3% (59.5) 34.0% (162.4) 80.9% (146.3) 83.6% Equity in net income of nonconsolidated affiliates 0.2 0.2 Noncontrolling interests (2.5) (2.1) Segment Adjusted EBITDA $ 34.8 $ 25.8 Percent change 34.9% In arriving at Adjusted EBITDA, the following was excluded: (a) Gain on disposal of assets (0.1) — Home Health and Hospice Segment - Adjusted EBITDA Segment Adjusted EBITDA for the quarter of $34.8 million. - Cost of services as a percent of revenue decreased primarily due to staffing productivity gains. * Reconciliation to GAAP provided on pages 29-31 Reconciliations to GAAP provided on pages 37-45 - Support and overhead costs increased as a percent of revenue primarily due to continued investments in additional sales and marketing employees. - Q3 2017 expense ratios compared to Q3 2016 were negatively impacted by ~$0.3 million in hurricane-related expenses in Q3 2017. - Q3 2017 included a $0.9 million benefit from the true-up to the purchase price of a 2016 acquisition.

12 Consolidated Adjusted EBITDA ($millions) Q3 2017 % of Consolidated Revenue Q3 2016 % of Consolidated Revenue Inpatient rehabilitation segment Adjusted EBITDA $ 200.3 $ 198.6 Home health and hospice segment Adjusted EBITDA 34.8 25.8 General and administrative expenses* (30.5) 3.1% (26.0) 2.8% Consolidated Adjusted EBITDA $ 204.6 $ 198.4 Percentage change 3.1% Consolidated Adjusted EBITDA for the quarter of $204.6 million. - General and administrative expenses increased as a percent of consolidated revenue primarily due to expenses associated with the Company’s rebranding and name change and the TeamWorks clinical collaboration initiative. General and Administrative Expenses Associated with Rebranding and TeamWorks ($millions) Q1 2017 Q2 2017 Q3 2017 YTD 2017 Rebranding and name change $ 0.5 $ 1.7 $ 1.5 $ 3.7 TeamWorks clinical collaboration(2) — 1.7 2.3 4.0 * General and administrative expenses in the above table exclude stock compensation of $9.2 million and $4.3 million for the third quarter of 2017 and 2016, respectively. . Reconciliations to GAAP provided on pages 37-45; Refer to pages 46-48 for end notes.

13 Earnings per Share - As Reported Q3 9 Months (In Millions, Except Per Share Data) 2017 2016 2017 2016 Consolidated Adjusted EBITDA $ 204.6 $ 198.4 $ 614.9 $ 594.8 Interest expense and amortization of debt discounts and fees (36.8) (42.5) (118.5) (130.5) Depreciation and amortization (46.2) (43.5) (137.2) (128.8) Stock-based compensation expense (9.2) (4.3) (37.9) (17.4) Noncash loss on disposal of assets (3.0) (1.6) (3.3) (2.0) 109.4 106.5 318.0 316.1 Certain items non-indicative of ongoing operations: Loss on early extinguishment of debt (0.3) (2.6) (10.7) (7.4) Professional fees — accounting, tax, and legal — — — (1.9) Pre-tax income 109.1 103.9 307.3 306.8 Income tax expense(3) (43.1) (42.1) (111.4) (124.2) Income from continuing operations* $ 66.0 $ 61.8 $ 195.9 $ 182.6 Interest and amortization on 2.0% Convertible Senior Subordinated Notes (net of tax)(4) — 2.4 4.6 7.2 Loss on extinguishment of 2.0% Convertible Senior Subordinated Notes (net of tax)(4) — — 6.2 — Diluted shares (see page 33) 99.0 99.4 99.1 99.5 Diluted earnings per share*(4) $ 0.67 $ 0.64 $ 2.08 $ 1.90 u EPS for the third quarter and first nine months of 2017 were impacted by: Ÿ Lower interest expense due primarily to the redemptions of the 7.75% Senior Notes due 2022 in 2016 Ÿ Higher depreciation and amortization resulting from capital investments Ÿ Higher stock-based compensation expense Ÿ Loss on early extinguishment of debt due to the Company’s amendment to its credit agreement governing its senior secured credit facility in September 2017 Ÿ Lower effective income tax rate resulting from windfall tax benefits(5) u EPS for the first nine months of 2017 were impacted by the loss on early extinguishment of debt due to the Company’s exercise of its early redemption option on its 2.0% Convertible Senior Subordinated Notes in Q2 2017. uEPS for Q3 2016 and first nine months of 2016 were impacted by the loss on early extinguishment of debt associated with the redemptions of the 7.75% Senior Notes due 2022. * Earnings per share are determined using income from continuing operations attributable to HealthSouth. Refer to pages 46-48 for end notes.

14 Q3 9 Months 2017 2016 2017 2016 Earnings per share, as reported $ 0.67 $ 0.64 $ 2.08 $ 1.90 Adjustments, net of tax: Professional fees — accounting, tax, and legal — — — 0.01 Mark-to-market adjustment for stock appreciation rights(7) (0.01) (0.01) 0.08 (0.01) Income tax adjustments(5) — — (0.10) — Loss on early extinguishment of debt(4) — 0.02 — 0.04 Sale of hospital — — — (0.01) Adjusted earnings per share* $ 0.66 $ 0.65 $ 2.07 $ 1.95 Adjusted Earnings per Share(6) * Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 42-45 Refer to pages 46-48 for end notes. Adjusted earnings per share removes from the GAAP earnings per share calculation the impact of items the Company believes are non-indicative of its ongoing operating performance.

15 Adjusted Free Cash Flow 9 Mos. 2016 (8) Adjusted EBITDA Working Capital and Other Cash Interest Expense Cash Tax Payments, Net of Refunds Maintenance Capital Expenditures Adjusted Free Cash Flow 9 Mos. 2017 $394.5 $20.1 $24.1 $9.4 ($44.4) ($27.6) $376.1 2017 Adjusted Free Cash Flow(8) Reconciliations to GAAP provided on pages 37-45 Refer to pages 46-48 for end notes. u Adjusted free cash flow in year-to-date 2017 decreased primarily as a result of increased cash payments for taxes and increased maintenance capital expenditures. Ÿ Cash payments for taxes increased due to exhaustion of federal NOL in Q1 2017. Ÿ Increased maintenance capital expenditures resulted from refurbishments at certain larger hospitals, leasehold improvements and furnishings associated with the build-out of the Company’s new home office location, growth in the IRF segment, and an enhanced hospital maintenance program. Ÿ Working capital decreased primarily due to improved collection of accounts receivable.

16 Refer to pages 46-48 for end notes. Updated Guidance Adjusted EBITDA(9) Adjusted Earnings per Share from Continuing Operations Attributable to HealthSouth(6) Net Operating Revenues Previous Full-Year Guidance (Last Reiterated on August 15, 2017) Updated 2017 Full-Year Guidance (As of October 26, 2017) Net Operating Revenues $3,900 million to $3,950 million Adjusted EBITDA(9) $810 million to $820 million Adjusted Earnings per Share from Continuing Operations Attributable to HealthSouth(6) $2.67 to $2.73 $3,875 million to $3,950 million $805 million to $820 million $2.64 to $2.73

17 Guidance Considerations Inpatient Rehabilitation u Estimated 1.9% increase in Medicare pricing for Q1 through Q3; ~0.8% for Q4 u Salary increase of ~3.0% u Q3 2016 included the benefit of a retroactive IME(1) adjustment of ~$4 million at the former Reliant hospital in Woburn, MA. u Bad debt expense of 1.5% to 1.9% of net operating revenues for Q4 2017 (range is reflective of the uncertainty related to the Cahaba contract transition - see page 22) u Estimated negative impact of $2 million to $3 million in Q4 2017 associated with the ongoing effects of Hurricane Maria on operations in Puerto Rico Home Health and Hospice u Estimated 1.5% to 2.0%, or ~$2 million to $4 million, net Medicare pricing reduction for Q4 2017 u Salary increase of ~3.0% u Assumes pre-claim review demonstration does not resume in 2017 u Inclusive of home health and hospice acquisitions in 2017 u Sale of pediatric home health assets in Q4 2016; Pediatrics generated ~$2 million of Adjusted EBITDA in 2016 Consolidated u Includes approximately $6 million to $8 million of operating expenses (included in corporate general and administrative expenses) associated with the rebranding and name change ($3.7 million of which was expensed in the first nine months of 2017) u Diluted share count of ~99.5 million shares u Tax rate of approximately 40%

18 Adjusted Free Cash Flow(8) and Tax Assumptions Certain Cash Flow Items (millions) 9 Months 2017 Actual 2017 Assumptions 2016 Actual • Cash interest expense (net of amortization of debt discounts and fees) $110.8 $145 to $150 $158.4 • Cash payments for taxes, net of refunds $62.0 $90 to $100 $31.9 • Working Capital and Other $(26.1) $25 to $50 $24.6 • Maintenance CAPEX $92.1 $130 to $150 $104.2 • Adjusted Free Cash Flow $376.1 $360 to $430 $474.5 Reconciliations to GAAP provided on pages 37-45 Refer to pages 46-48 for end notes. u Increased maintenance capital expenditures due to refurbishments at certain larger hospitals, leasehold improvements and furnishings associated with the build-out of the Company’s new home office location, growth in the Company, and an enhanced hospital maintenance program. u 2017 assumption for cash tax payments was narrowed from a range of $95 to $115 million to a range of $90 to $100 million; increased cash payments for taxes in 2017 due to exhaustion of federal NOL in Q1 2017 u Working capital assumption for 2017 was revised from a range of $50 to $70 million to a range of $25 to $50 million due to year-to-date collections of accounts receivable. Free cash flow for the remainder of 2017 will be impacted primarily by the timing of maintenance capital expenditures and changes in working capital. u 2017 assumption for cash interest expense was narrowed from a range of $145 to $155 million to a range of $145 to $150 million. Free cash flow range for 2017 has been increased and narrowed.

19 *Net redemptions in 2017 exclude ~$276 million associated with the non-cash conversion of the Convertible Senior Subordinated Notes. See the debt schedule on page 28. Refer to pages 46-48 for end notes. Free Cash Flow Priorities (In Millions) 9 Months 2017 2017 2016 Actuals Assumptions Actuals IRF bed expansions $15.1 $30 to $40 $19.1 New IRF’s - De novos 58.8 85 to 105 72.6 - Acquisitions 10.9 TBD — - Replacement hospitals and other 4.4 10 to 20 11.1 New home health and hospice acquisitions 25.7 50 to 100 48.1 $114.9 $175 to $265, excluding IRF acquisitions $150.9 9 Months 2017 2017 2016 Actuals Assumptions Actuals Debt (borrowings) redemptions, net* $118.3 $TBD $155.1 Cash dividends on common stock(10) 67.0 ~$92 83.8 Common stock repurchases 38.1 TBD 65.6 $223.4 $TBD $304.5 Shareholder Distributions Growth in Core Business Debt Reduction Highest Priorit y ~$58 million authorization remaining as of September 30, 2017 Quarterly cash dividend currently set at $0.25 per common share

Appendix

21 HealthSouth: A Leading Provider of Post-Acute Care ~60% of HealthSouth's IRFs are located within a 30-mile radius of an Encompass location. Inpatient Rehabilitation Portfolio - As of September 30, 2017 126 Inpatient Rehabilitation Hospitals • 42 operate as joint ventures with acute care hospitals 31 Number of States (plus Puerto Rico) ~ 29,400 Employees Key Statistics - Trailing 4 Quarters ~ $3.1 Billion Revenue 169,486 Inpatient Discharges 598,869 Outpatient Visits Note: One of the 126 IRFs and two of the 198 adult home health locations are nonconsolidated. These locations are accounted for using the equity method of accounting. IRF Market Share Largest owner & operator of IRFs 22% of Licensed Beds 29% of Medicare Patients Served Home Health and Hospice Market Share 4th largest provider of Medicare-certified skilled home health services Encompass Home Health and Hospice Portfolio – As of September 30, 2017 198 Home Health Locations 37 Hospice Locations 28 Number of States ~ 8,600 Employees Key Statistics - Trailing 4 Quarters ~ $757 million Revenue 204,371 Home Health Episodes 4,511 Hospice Admissions

22 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment Impact to Income Statement Period New Denials Collections of Previously Denied Claims Bad Debt Expense for New Denials Update of Reserve for Prior Denials (In Millions) Q3 2017 $7.4 $(6.2) $2.2 $— Q2 2017 16.5 (7.7) 4.9 — Q1 2017 19.0 (5.9) 5.7 — Q4 2016 17.8 (4.4) 5.4 0.5 Q3 2016 15.7 (8.5) 4.6 — Q2 2016 18.7 (4.9) 4.6 — Q1 2016 22.7 (8.4) 6.0 — Q4 2015 22.5 (4.1) 5.6 (1.3) Q3 2015 22.0 (4.1) 5.9 (1.1) Q2 2015 18.2 (3.8) 4.9 — Q1 2015 16.3 (3.0) 4.2 — Impact to Balance Sheet Sept. 30, 2017 Dec. 31, 2016 Dec. 31, 2015 (In Millions) Pre-payment claims denials $ 173.0 $ 159.7 $ 114.8 Recorded reserves (51.9) (47.9) (31.2) Net accounts receivable from pre-payment claims denials $ 121.1 $ 111.8 $ 83.6 Background Ÿ For several years, under programs designated as “widespread probes,” certain Medicare Administrative Contractors (“MACs”) have conducted pre- payment claim reviews and denied payment for certain diagnosis codes. Ÿ HealthSouth appeals most denials. On claims it takes to an administrative law judge (“ALJ”), HealthSouth historically has experienced an approximate 70% success rate. – MACs identify medical documentation issues as a leading basis for denials. – HealthSouth's investment in clinical information systems and its medical services department has further improved its documentation and reduced technical denials. – However, MACs and other HHS contractors continue to issue denials without regulatory basis. Ÿ By statute, ALJ decisions are due within 90 days of a request for hearing, but appeals are taking years. HHS has implemented rule changes to address the backlog of appeals, but their effect is uncertain. Ÿ Last year, a federal court ordered HHS to eliminate the backlog by the end of CY 2020. HHS continues to object that it cannot clear the backlog in the timeframe established by the court. Although HHS remains bound by the order, the courts are considering how HHS will comply. Ÿ All Medicare providers continue to experience delays. The backlog is growing because the ALJs receive one year's worth of appeals every four to six weeks, according to HHS. – Currently, ALJs are hearing HealthSouth appeals from claims denied up to seven years ago. Ÿ In summer 2017, CMS announced the Targeted Probe and Educate(“TPE”) initiative, which is expected to be rolled out nationwide by year end. For more information regarding TPE, see https://www.cms.gov/Research-Statistics- Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance- Programs/Medical-Review/Targeted-Probe-and-EducateTPE.html Ÿ Effective February 2018, Palmetto GBA will assume responsibilities for Cahaba’s MAC jurisdiction. See announcement from CMS at https:// www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative- Contractors/Downloads/JurisdictionJAwardFactSheet-09082017.pdf HealthSouth reserves pre-payment claim denials via the provision for doubtful accounts upon notice from a MAC a claim is under review. The Company currently has 75 hospitals under Cahaba's MAC jurisdiction.

23 Expansion Activity Inpatient Rehabilitation Facilities # of New Beds 2017 2018 2019 De Novo: Pearland, TX 40 — — Shelby County, AL — 34 — Hilton Head, SC — 38 — Murrieta, CA — — 50 Joint Ventures: Gulfport, MS (April) 33 — — Westerville, OH (April) 60 — — Jackson, TN* (July) 48 — — Murrells Inlet, SC — 29 — Winston-Salem, NC — 68 — Lubbock, TX — — 40 Bed Expansions, net** 167 ~100 ~100 348 ~269 ~190 * ** Existing wholly owned, 40-bed IRF in Martin, TN became JV in conjunction with this opening Net bed expansions in each year may change due to the timing of certain regulatory approvals and/or construction delays. Q3 2017 acquisition highlights: u Acquired six home health locations in Illinois, Indiana, Arizona, and Ohio u Merged one home health location in Virginia with another existing location Q3 2017 expansion activity highlights: uBegan operating a new 48-bed inpatient rehabilitation hospital with West Tennessee Healthcare in Jackson, TN uEntered into an agreement with University Medical Center Health System to build a 40-bed inpatient rehabilitation hospital in Lubbock, TX uDelayed opening of new 40-bed hospital in Pearland, TX from October 1 to mid-Q4 2017 due to damage caused by Hurricane Harvey uExpanded existing hospitals by 59 beds 2 3 4 5 7 Previously Announced IRF Development Projects Underway 2 New States Home Health and Hospice # of locations December 31, 2016 223 Acquisitions 12 Opening of new locations 3 Merging of locations (3) September 30, 2017 235 1 6 Winston-Salem, NC Gulfport, MS 7

24 • Same-store IRF growth • New-store IRF growth (de novos and acquisitions) • Same-store home health and hospice growth • New-store home health and hospice growth (acquisitions) Core Growth Strong Balance Sheet Key Operational Initiatives Shareholder Distributions Opportunistic Growth Business Outlook 2017 to 2019* 2017 2018 2019 Business Model • Adjusted EBITDA CAGR: 5% - 9%** • Strong free cash flow generation • Quarterly cash dividends • Opportunistic repurchases - (~$58 million authorization remaining as of September 30, 2017) • Implement rebranding and name change • Enhance clinical collaboration between IRFs and home health locations (TeamWorks) • Refine and expand clinical data analytics utilization to further improve patient outcomes (e.g., ReACT; Sepsis Alert) • Leverage clinical expertise to increase stroke admissions • Complete installation of EMR and enhance utilization via continuous in-service upgrades • Develop advanced analytics and predictive models for post-acute management (Post-Acute Innovation Center) • Increase participation in alternative payment models • Leverage of 3.5x or less, subject to opportunities for creating shareholder value Strategy Componen t • Consider acquisitions of other complementary businesses * If legislation affecting Medicare is passed, or if significant changes are made to the home health payment system as suggested in the 2018 proposed home health rule, HealthSouth will evaluate its effect on its business model. ** This is a multi-year CAGR; annual results may fall outside the range.

25 • 10% to15% annual episode growth • Includes $35-$40 million per annum in agency acquisitions Volume (Includes New Stores) Inpatient Rehabilitation Home Health & Hospice Medicare Pricing Approx. 73% of Revenue Approx. 85% of Revenue FY 2017 Q416-Q317 FY 2018 Q417-Q318(11) FY 2019 Q418-Q319 Mgmt. Estimate CY 2017 Q117-Q417 CY 2018 Q118-Q418(11) CY 2019* Q119-Q419 Market basket update 2.7% 1.0% 3.3% 2.8% 1.0% Healthcare reform reduction (75) bps - (75) bps - - Healthcare reform rebasing adjustment - - - (2.3%) - Coding intensity reduction - - - (0.9%) (0.9%) Expiration of rural add-on - - - - (0.5%) Healthcare reform productivity adjustment (30) bps - (100) bps (30) bps - Net impact - all providers 1.65% 1.0% 1.55% (0.7%) (0.4%) Outlier fixed dollar loss adjustment - - - (0.1%) - Impact from case mix re-weighting - - - (0.9%) - Impact from change in outlier calculation - - - (1.9%) - Impact of patient mix changes and outlier mitigation - - - 1.6 - 2.1% - Estimated impact to HealthSouth(12) 1.9% 0.8% (1.5%) - (2.0%) Medicare Advantage & Managed Care Pricing Approx. 19% of Revenue Approx. 14% of Revenue Expected Increases 2-4% 2-4% 2-4% 0-2% 0-2% 0-2% Business Outlook 2017 to 2019: Revenue Assumptions • 3+% annual discharge growth • 10+% annual episode growth *CMS has proposed a new home health reimbursement model for 2019; at this time, mgmt. is unable to predict its impact, if implemented as proposed. Refer to pages 46-48 for end notes.

26 Inpatient Rehabilitation Home Health and Hospice Business Outlook 2017 to 2019: Labor and Other Expense Assumptions Salaries & Benefits ~70% Hospital Expenses ~30% Salaries and Benefits 2017 2018 2019 Salary increases 2.75-3.25% 2.75-3.25% 2.75-3.25% Benefit costs increases 5-10% 5-10% 5-10% Hospital Expenses • Other operating expenses and supply costs tracking with inflation Salaries & Benefits ~85% Other Expenses ~15% Home Health Expenses • Other operating expenses and supply costs tracking with inflation Percent of Salaries & Benefits Salaries ~ 90% Benefits ~10%

27 2017 2021 2022 2022 2023 2024 2025 $350 Senior Notes 5.75% $1,200 Senior Notes 5.75% $300 Senior Notes 5.125% $138 Drawn + $35 reserved for LC’s As of September 30, 2017* Debt Maturity Profile - Face Value ($ in millions) $527 Available Callable beginning November 2017 HealthSouth is positioned with a cost-efficient, flexible capital structure. Revolver Revolver Capacity $298 Term Loans Callable beginning September 2020 * This chart does not include ~$272 million of capital lease obligations or ~$80 million of other notes payable. See the debt schedule on page 28. No significant debt maturities prior to 2022 Callable beginning March 2018

28 Debt Schedule Change in September 30, Dec. 31, Debt vs. ($millions) 2017 2016 YE 2016 Advances under $700 million revolving credit facility, September 2022 - LIBOR +150bps $ 138.0 $ 152.0 $ (14.0) Term loan facility, September 2022 - LIBOR +150bps 298.3 421.2 (122.9) Bonds Payable: 5.125% Senior Notes due 2023 295.7 295.3 0.4 5.75% Senior Notes due 2024 1,193.7 1,193.2 0.5 5.75% Senior Notes due 2025 344.3 343.9 0.4 2.0% Convertible Senior Subordinated Notes due 2043 — 275.7 (275.7) Other notes payable 80.1 55.8 24.3 Capital lease obligations 272.3 279.3 (7.0) Long-term debt $ 2,622.4 $ 3,016.4 $ (394.0) Debt to Adjusted EBITDA 3.2x 3.8x Reconciliations to GAAP provided on pages 37-45

29 25.0 20.0 15.0 10.0 5.0 0.0 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 New-Store/Same-Store IRF Growth Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Fairlawn(13) 1.9% 2.0% 1.1% New Store 0.6% 1.8% 4.4% 5.7% 15.6% 14.2% 11.7% 10.7% 1.3% 1.2% 1.9% 2.4% Same Store* 2.2% 2.9% 2.8% 3.9% 3.0% 2.8% 1.9% 1.9% 0.1% 1.6% 1.6% 1.4% Total by Qtr. 4.7% 6.7% 8.3% 9.6% 18.6% 17.0% 13.6% 12.6% 1.4% 2.8% 3.5% 3.8% Total by Year 3.5% 10.9% 10.8% Same-Store Year* 1.3% 3.2% 1.7% Same-Store Year UDS( 14) (0.2)% 1.3% (0.6)% Altamonte Springs, FL (50 beds) Johnson City, TN (26 beds) Newnan, GA (50 beds) Middletown, DE (34 beds) Reliant (857 beds) Franklin, TN (40 beds) Lexington, KY (158 beds) Savannah, GA (50 beds) Bryan, TX (49 beds) Broken Arrow, OK (22 beds) * Includes consolidated HealthSouth inpatient rehabilitation hospitals classified as same store during each period Refer to pages 46-48 for end notes. Modesto, CA (50 beds) Hot Springs, AR (27 beds) Gulfport, MS (33 beds) Westerville, OH (60 beds) Jackson, TN (48 beds)

30 Payment Sources (Percent of Revenues) Inpatient Rehabilitation Segment Home Health and Hospice Segment Consolidated Q3 Q3 Q3 9 Months Full Year 2017 2016 2017 2016 2017 2016 2017 2016 2016 Medicare 73.3% 73.3% 85.2% 81.8% 75.7% 74.8% 75.3% 75.0% 75.2% Medicare Advantage 8.1% 7.6% 9.6% 8.8% 8.4% 7.9% 8.7% 7.9% 7.9% Managed care 10.7% 11.4% 3.9% 4.5% 9.4% 10.1% 9.6% 9.9% 9.8% Medicaid* 3.4% 3.0% 1.1% 4.7% 2.9% 3.3% 2.8% 3.3% 3.2% Other third-party payors 1.6% 1.8% —% —% 1.3% 1.5% 1.3% 1.4% 1.4% Workers’ compensation 0.9% 1.0% —% —% 0.7% 0.8% 0.7% 0.8% 0.8% Patients 0.6% 0.6% 0.1% 0.1% 0.5% 0.5% 0.5% 0.5% 0.5% Other income 1.4% 1.3% 0.1% 0.1% 1.1% 1.1% 1.1% 1.2% 1.2% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% * In Q4 2016, the home health and hospice segment sold its pediatric home health assets. As a result, the segment’s percentage of Medicaid has declined.

31 Inpatient Rehabilitation Operational and Labor Metrics Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2017 2017 2017 2016 2016 2016 2016 2016 (In Millions) Net patient revenue-inpatient $ 768.6 $ 762.9 $ 766.2 $ 740.9 $ 724.1 $ 721.2 $ 719.4 $ 2,905.5 Net patient revenue-outpatient and other revenues 26.2 27.1 26.3 26.7 27.6 31.4 29.8 115.6 Net operating revenues $ 794.8 $ 790.0 $ 792.5 $ 767.6 $ 751.7 $ 752.6 $ 749.2 $ 3,021.1 (Actual Amounts) Discharges(15) 42,948 42,805 42,259 41,474 41,368 41,365 41,098 165,305 Net patient revenue per discharge $ 17,896 $ 17,823 $ 18,131 $ 17,864 $ 17,504 $ 17,435 $ 17,505 $ 17,577 Outpatient visits 138,689 153,415 152,454 154,311 158,981 164,761 162,649 640,702 Average length of stay 12.8 12.7 12.9 12.8 12.7 12.6 12.9 12.8 Occupancy % 68.2% 69.3% 71.0% 67.8% 67.8% 68.2% 68.9% 67.8% # of licensed beds* 8,748 8,641 8,528 8,504 8,441 8,430 8,481 8,504 Occupied beds 5,966 5,988 6,055 5,766 5,723 5,749 5,843 5,766 Full-time equivalents (FTEs)(16) 20,740 20,474 20,254 19,930 19,663 19,503 19,352 19,612 Contract labor 235 251 260 245 241 205 194 221 Total FTE and contract labor 20,975 20,725 20,514 20,175 19,904 19,708 19,546 19,833 EPOB(17) 3.52 3.46 3.39 3.50 3.48 3.43 3.35 3.44 * The decrease in licensed beds from Q1 2016 to Q2 2016 was due to the sale of the hospital in Beaumont, TX (61 beds). Refer to pages 46-48 for end notes.

32 Home Health and Hospice Operational Metrics Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2017 2017 2017 2016 2016 2016 2016 2016 (In Millions) Net home health revenue $ 181.2 $ 172.9 $ 165.3 $ 165.2 $ 162.0 $ 157.1 $ 150.9 $ 635.2 Net hospice and other revenue 19.6 18.4 17.0 17.1 13.1 11.0 9.7 50.9 Net operating revenues $ 200.8 $ 191.3 $ 182.3 $ 182.3 $ 175.1 $ 168.1 $ 160.6 $ 686.1 Home Health: (Actual Amounts) Admissions(18) 31,471 30,823 30,810 27,957 27,239 25,753 25,763 106,712 Recertifications 24,396 22,568 20,546 21,422 20,888 20,432 19,453 82,195 Episodes 53,757 52,101 49,260 49,253 46,866 45,774 43,844 185,737 Average revenue per episode $ 3,022 $ 2,989 $ 2,991 $ 3,023 $ 3,032 $ 3,033 $ 3,035 $ 3,031 Episodic visits per episode 17.7 18.1 18.7 18.4 19.0 18.9 19.1 18.8 Total visits 1,101,109 1,095,225 1,070,356 1,033,502 1,001,021 967,968 937,804 3,940,295 Cost per visit $ 76 $ 73 $ 75 $ 76 $ 75 $ 73 $ 73 $ 74 Hospice: Admissions(19) 1,273 1,114 1,128 996 832 785 724 3,337 Patient days 123,491 113,028 108,717 104,183 83,628 71,277 63,431 322,519 Revenue per day $ 159 $ 162 $ 157 $ 164 $ 157 $ 154 $ 153 $ 158 Refer to pages 46-48 for end notes.

33 Share Information Weighted Average for the Period Q3 9 Months Full Year (Millions) 2017 2016 2017 2016 2016 2015 2014 Basic shares outstanding(20)(21) 97.8 89.1 92.3 89.3 89.1 89.4 86.8 Convertible perpetual preferred stock(20) — — — — — 1.0 3.2 Convertible senior subordinated notes(21) — 8.5 5.4 8.5 8.5 8.3 8.2 Restricted stock awards, dilutive stock options, restricted stock units, and common stock warrants(22) 1.2 1.8 1.4 1.7 1.9 2.3 2.5 Diluted shares outstanding 99.0 99.4 99.1 99.5 99.5 101.0 100.7 End of Period Q3 9 Months Full Year (Millions) 2017 2016 2017 2016 2016 2015 2014 Basic shares outstanding(20)(21) 97.6 89.1 97.6 89.1 88.3 89.3 86.6 Refer to pages 46-48 for end notes.

34 Segment Operating Results Q3 2017 Q3 2016 IRF Home Health and Hospice Reclasses HealthSouth Consolidated IRF Home Health and Hospice Reclasses HealthSouth Consolidated Net operating revenues $ 794.8 $ 200.8 $ — $ 995.6 $ 751.7 $ 175.1 $ — $ 926.8 Less: Provision for doubtful accounts (11.3) (1.3) — (12.6) (13.7) (1.1) — (14.8) 783.5 199.5 — 983.0 738.0 174.0 — 912.0 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (403.2) — (138.9) (542.1) (371.2) — (126.2) (497.4) Other operating expenses(a) (117.4) — (17.2) (134.6) (110.1) — (14.6) (124.7) Supplies (33.1) — (3.4) (36.5) (31.9) — (2.9) (34.8) Occupancy (15.7) — (2.9) (18.6) (15.0) — (2.6) (17.6) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (93.5) 93.5 — — (86.8) 86.8 — Support and overhead costs — (68.9) 68.9 — — (59.5) 59.5 — (569.4) (162.4) — (731.8) (528.2) (146.3) — (674.5) Other income 1.0 — — 1.0 0.8 — — 0.8 Equity in net income of nonconsolidated affiliates 1.9 0.2 — 2.1 2.3 0.2 — 2.5 Noncontrolling interest (16.7) (2.5) — (19.2) (14.3) (2.1) — (16.4) Segment Adjusted EBITDA $ 200.3 $ 34.8 $ — 235.1 $ 198.6 $ 25.8 $ — 224.4 General and administrative expenses(b) (30.5) (26.0) Adjusted EBITDA $ 204.6 $ 198.4 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 3.1 $ (0.1) $ — $ 3.0 $ 1.6 $ — $ — $ 1.6 (b) Stock-based compensation — — — 9.2 — — — 4.3 Reconciliations to GAAP provided on pages 37-45

35 Segment Operating Results Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Inpatient Home Health and Hospice Reclasses HLS Consolidated Inpatient Home Health and Hospice Reclasses HLS Consolidated Net operating revenues $ 2,377.3 $ 574.4 $ — $ 2,951.7 $ 2,253.5 $ 503.8 $ — $ 2,757.3 Less: Provision for doubtful accounts (38.4) (4.3) — (42.7) (43.8) (2.9) — (46.7) 2,338.9 570.1 — 2,909.0 2,209.7 500.9 — 2,710.6 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (1,195.7) — (404.3) (1,600.0) (1,107.2) — (362.4) (1,469.6) Other operating expenses(a) (342.1) — (51.8) (393.9) (321.7) — (43.3) (365.0) Supplies (100.6) — (10.0) (110.6) (96.1) — (8.1) (104.2) Occupancy (46.3) — (8.5) (54.8) (46.0) — (7.5) (53.5) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (271.2) 271.2 — — (246.8) 246.8 — Support and overhead costs — (203.4) 203.4 — — (174.5) 174.5 — (1,684.7) (474.6) — (2,159.3) (1,571.0) (421.3) — (1,992.3) Other income 2.9 — — 2.9 2.1 — — 2.1 Equity in net income of nonconsolidated affiliates 5.6 0.6 — 6.2 6.7 0.6 — 7.3 Noncontrolling interest (48.6) (4.6) — (53.2) (47.9) (5.8) — (53.7) Segment Adjusted EBITDA $ 614.1 $ 91.5 $ — 705.6 $ 599.6 $ 74.4 $ — 674.0 General and administrative expenses(b) (90.7) (79.2) Adjusted EBITDA $ 614.9 $ 594.8 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 3.5 $ (0.2) $ — $ 3.3 $ 2.3 $ (0.3) $ — $ 2.0 (b) Stock-based compensation — — — 37.9 — — — 17.4 Reconciliations to GAAP provided on pages 37-45

36 Segment Operating Results Year Ended December 31, 2016 IRF Home Health and Hospice Reclasses HealthSouth Consolidated Net operating revenues $ 3,021.1 $ 686.1 $ — $ 3,707.2 Less: Provision for doubtful accounts (57.0) (4.2) — (61.2) 2,964.1 681.9 — 3,646.0 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (1,493.4) — (492.5) (1,985.9) Other operating expenses(a) (431.5) — (59.9) (491.4) Supplies (128.8) — (11.2) (140.0) Occupancy (61.2) — (10.1) (71.3) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (336.5) 336.5 — Support and overhead costs — (237.2) 237.2 — (2,114.9) (573.7) — (2,688.6) Other income 2.9 — — 2.9 Equity in net income of nonconsolidated affiliates 9.1 0.7 — 9.8 Noncontrolling interest (64.0) (6.5) — (70.5) Segment Adjusted EBITDA $ 797.2 $ 102.4 $ — 899.6 General and administrative expenses(b) (106.0) Adjusted EBITDA $ 793.6 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal of assets $ 4.3 $ (3.6) $ — $ 0.7 (b) Stock-based compensation expense — — — 27.4 Reconciliations to GAAP provided on pages 37-45

37 Reconciliation of Net Income to Adjusted EBITDA(9) 2017 Q1 Q2 Q3 9 Months (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Net Income $ 84.4 $ 79.4 $ 85.1 $ 248.9 Loss (income) from disc ops, net of tax, attributable to HealthSouth 0.3 (0.2) 0.1 0.2 Net income attributable to noncontrolling interests (17.6) (16.4) (19.2) (53.2) Income from continuing operations attributable to HealthSouth* 67.1 $ 0.70 62.8 $ 0.66 66.0 $ 0.67 195.9 $ 2.08 Provision for income tax expense 39.7 28.6 43.1 111.4 Interest expense and amortization of debt discounts and fees 41.3 40.4 36.8 118.5 Depreciation and amortization 45.2 45.8 46.2 137.2 Loss on early extinguishment of debt — 10.4 0.3 10.7 Net noncash (gain) loss on disposal of assets (0.5) 0.8 3.0 3.3 Stock-based compensation expense 8.0 20.7 9.2 37.9 Adjusted EBITDA $ 200.8 $ 209.5 $ 204.6 $ 614.9 Weighted average common shares outstanding: Basic 88.8 90.3 97.8 92.3 Diluted 99.0 98.9 99.0 99.1 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Refer to pages 46-48 for end notes.

38 Reconciliation of Net Income to Adjusted EBITDA(9) 2016 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net Income $ 76.7 $ 81.2 $ 78.1 $ 82.1 $ 318.1 Loss (income) from disc ops, net of tax, attributable to HealthSouth 0.1 0.1 0.1 (0.3) — Net income attributable to noncontrolling interests (18.7) (18.6) (16.4) (16.8) (70.5) Income from continuing operations attributable to HealthSouth* 58.1 $ 0.61 62.7 $ 0.65 61.8 $ 0.64 65.0 $ 0.68 247.6 $ 2.59 Professional fees — acct, tax, and legal 0.2 1.7 — — 1.9 Provision for income tax expense 39.7 42.4 42.1 39.7 163.9 Interest expense and amortization of debt discounts and fees 44.6 43.4 42.5 41.6 172.1 Depreciation and amortization 42.4 42.9 43.5 43.8 172.6 Loss on early extinguishment of debt 2.4 2.4 2.6 — 7.4 Net noncash loss (gain) on disposal of assets 0.2 0.2 1.6 (1.3) 0.7 Stock-based compensation expense 4.5 8.6 4.3 10.0 27.4 Adjusted EBITDA $ 192.1 $ 204.3 $ 198.4 $ 198.8 $ 793.6 Weighted average common shares outstanding: Basic 89.5 89.3 89.1 88.6 89.1 Diluted 99.4 99.4 99.4 99.2 99.5 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Refer to pages 46-48 for end notes.

39 Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q3 9 Months Full Year (In Millions) 2017 2016 2017 2016 2016 Net cash provided by operating activities $ 173.8 $ 177.6 $ 505.8 $ 499.4 $ 634.4 Provision for doubtful accounts (12.6) (14.8) (42.7) (46.7) (61.2) Professional fees — accounting, tax, and legal — — — 1.9 1.9 Interest expense and amortization of debt discounts and fees 36.8 42.5 118.5 130.5 172.1 Equity in net income of nonconsolidated affiliates 2.1 2.5 6.2 7.3 9.8 Net income attributable to noncontrolling interests in continuing operations (19.2) (16.4) (53.2) (53.7) (70.5) Amortization of debt-related items (1.0) (3.5) (7.7) (10.3) (13.8) Distributions from nonconsolidated affiliates (2.2) (2.9) (6.6) (5.9) (8.5) Current portion of income tax expense 36.0 4.6 60.1 13.6 31.0 Change in assets and liabilities (9.8) 6.4 32.6 51.7 91.3 Net premium paid on bond transactions — 1.9 — 5.8 5.8 Cash used in operating activities of discontinued operations 0.1 0.1 0.7 0.6 0.7 Other 0.6 0.4 1.2 0.6 0.6 Adjusted EBITDA $ 204.6 $ 198.4 $ 614.9 $ 594.8 $ 793.6

40 Reconciliation of Segment Adjusted EBITDA to Income from Continuing Operations Before Income Tax Expense Three Months Ended Nine Months Ended Year Ended September 30, September 30, December 31, 2017 2016 2017 2016 2016 (In Millions) Total segment Adjusted EBITDA $ 235.1 $ 224.4 $ 705.6 $ 674.0 $ 899.6 General and administrative expenses (39.7) (30.3) (128.6) (96.6) (133.4) Depreciation and amortization (46.2) (43.5) (137.2) (128.8) (172.6) Loss on disposal of assets (3.0) (1.6) (3.3) (2.0) (0.7) Professional fees — accounting, tax, and legal — — — (1.9) (1.9) Loss on early extinguishment of debt (0.3) (2.6) (10.7) (7.4) (7.4) Interest expense and amortization of debt discounts and fees (36.8) (42.5) (118.5) (130.5) (172.1) Net income attributable to noncontrolling interests 19.2 16.4 53.2 53.7 70.5 Income from continuing operations before income tax expense $ 128.3 $ 120.3 $ 360.5 $ 360.5 $ 482.0

41 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow(8) Q3 9 Months Full-Year (In Millions) 2017 2016 2017 2016 2016 Net cash provided by operating activities $ 173.8 $ 177.6 $ 505.8 $ 499.4 $ 634.4 Impact of discontinued operations 0.1 0.1 0.7 0.6 0.7 Net cash provided by operating activities of continuing operations 173.9 177.7 506.5 500.0 635.1 Capital expenditures for maintenance (37.6) (23.9) (92.1) (64.5) (104.2) Distributions paid to noncontrolling interests of consolidated affiliates (14.2) (15.9) (38.3) (49.5) (64.9) Items non-indicative of ongoing operations: Cash paid for professional fees — accounting, tax, and legal — — — 1.9 1.9 Transaction costs and related assumed liabilities — — — 0.8 0.8 Net premium on bond issuance/repayment — 1.9 — 5.8 5.8 Adjusted free cash flow $ 122.1 $ 139.8 $ 376.1 $ 394.5 $ 474.5 Cash dividends on common stock $ 23.5 $ 20.5 $ 67.0 $ 62.4 $ 83.8 Refer to pages 46-48 for end notes.

42 For the Three Months Ended September 30, 2017 Adjustments As Reported Mark-to- Market Adjustment for Stock Appreciation Rights Income Tax Adjustments(5) Loss on Early Extinguishment of Debt As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 204.6 $ — $ — $ — $ 204.6 Depreciation and amortization (46.2) — — — (46.2) Loss on early extinguishment of debt(4) (0.3) — — 0.3 — Interest expense and amortization of debt discounts and fees (36.8) — — — (36.8) Stock-based compensation (9.2) (1.0) — — (10.2) Loss on disposal of assets (3.0) — — — (3.0) Income from continuing operations before income tax expense 109.1 (1.0) — 0.3 108.4 Provision for income tax expense (43.1) 0.4 (0.4) (0.1) (43.2) Income from continuing operations attributable to HealthSouth $ 66.0 $ (0.6) $ (0.4) $ 0.2 $ 65.2 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax — — Numerator for diluted earnings per share $ 66.0 $ 65.2 Diluted earnings per share from continuing operations, as reported* $ 0.67 $ (0.01) $ — $ — $ 0.66 Diluted shares used in calculation 99.0 Adjusted EPS(6) - Q3 2017 * Adjusted EPS may not sum across due to rounding. Refer to pages 46-48 for end notes.

43 For the Three Months Ended September 30, 2016 Adjustments As Reported Mark-to- Market Adjustment for Stock Appreciation Rights Loss on Early Extinguishment of Debt As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 198.4 $ — $ — $ 198.4 Depreciation and amortization (43.5) — — (43.5) Loss on early extinguishment of debt (2.6) — 2.6 — Interest expense and amortization of debt discounts and fees (42.5) — — (42.5) Stock-based compensation (4.3) (1.8) — (6.1) Loss on disposal of assets (1.6) — — (1.6) Income from continuing operations before income tax expense 103.9 (1.8) 2.6 104.7 Provision for income tax expense (42.1) 0.7 (1.0) (42.4) Income from continuing operations attributable to HealthSouth $ 61.8 $ (1.1) $ 1.6 $ 62.3 Add: Interest on convertible debt, net of tax 2.4 2.4 Numerator for diluted earnings per share $ 64.2 $ 64.7 Diluted earnings per share from continuing operations* $ 0.64 $ (0.01) $ 0.02 $ 0.65 Diluted shares used in calculation 99.4 Adjusted EPS(6) - Q3 2016 * Adjusted EPS may not sum across due to rounding. Refer to pages 46-48 for end notes.

44 Adjusted EPS(6) - YTD 2017 For the Nine Months Ended September 30, 2017 Adjustments As Reported Mark-to- Market Adjustment for Stock Appreciation Rights Loss on Early Extinguishment of Debt Income Tax Adjustments(5) As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 614.9 $ — $ — $ — $ 614.9 Depreciation and amortization (137.2) — — — (137.2) Loss on early extinguishment of debt(4) (10.7) — 0.3 — (10.4) Interest expense and amortization of debt discounts and fees (118.5) — — — (118.5) Stock-based compensation (37.9) 13.9 — — (24.0) Loss on disposal of assets (3.3) — — — (3.3) Income from continuing operations before income tax expense 307.3 13.9 0.3 — 321.5 Provision for income tax expense (111.4) (5.6) (0.1) (10.4) (127.5) Income from continuing operations attributable to HealthSouth $ 195.9 $ 8.3 $ 0.2 $ (10.4) $ 194.0 Add: Interest, amortization, and loss on extinguishment of convertible debt, net of tax 10.8 10.8 Numerator for diluted earnings per share $ 206.7 $ 204.8 Diluted earnings per share from continuing operations, as reported* $ 2.08 $ 0.08 $ — $ (0.10) $ 2.07 Diluted shares used in calculation 99.1 * Adjusted EPS may not sum across due to rounding. Refer to pages 46-48 for end notes.

45 Adjusted EPS(6) - YTD 2016 For the Nine Months Ended September 30, 2016 Adjustments As Reported Professional Fees — Accounting, Tax, & Legal Mark-to- Market Adjustment for Stock Appreciation Rights Loss on Early Extinguishment of Debt Sale of Hospital As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 594.8 $ — $ — $ — $ — $ 594.8 Depreciation and amortization (128.8) — — — — (128.8) Professional fees — accounting, tax, and legal (1.9) 1.9 — — — — Loss on early extinguishment of debt (7.4) — — 7.4 — — Interest expense and amortization of debt discounts and fees (130.5) — — — — (130.5) Stock-based compensation (17.4) — (1.4) — — (18.8) Loss on disposal of assets (2.0) — — — (0.9) (2.9) Income from continuing operations before income tax expense 306.8 1.9 (1.4) 7.4 (0.9) 313.8 Provision for income tax expense (124.2) (0.8) 0.5 (3.0) 0.4 (127.1) Income from continuing operations attributable to HealthSouth $ 182.6 $ 1.1 $ (0.9) $ 4.4 $ (0.5) $ 186.7 Add: Interest on convertible debt, net of tax 7.2 7.2 Numerator for diluted earnings per share $ 189.8 $ 193.9 Diluted earnings per share from continuing operations* $ 1.90 $ 0.01 $ (0.01) $ 0.04 $ (0.01) $ 1.95 Diluted shares used in calculation 99.5 * Adjusted EPS may not sum across due to rounding. Refer to pages 46-48 for end notes.

46 End Notes (1) Medicare provides that hospitals with residents in an approved graduate medical education program receive an additional payment for a Medicare discharge to reflect higher patient care costs of teaching hospitals relative to non-teaching hospitals. This additional payment is known as an Indirect Medical Education (“IME”) adjustment. The Company’s revenues for the third quarter of 2016 were positively impacted by ~$4 million due to a retroactive IME adjustment for 2014 and 2015, as well as the year-to-date period through July 2016, for a former Reliant hospital in Woburn, MA. (2) In the first quarter of 2017, approximately $1 million associated with the TeamWorks clinical collaboration initiative was included in operating expenses within the inpatient rehabilitation segment. Total estimated costs to the Company in 2017 for the TeamWorks clinical collaboration initiative is ~$5 million. (3) Current income tax expense was $36.0 million and $60.1 million for the three and nine months ended September 30, 2017 and $4.6 million and $13.6 million for the three and nine months ended September 30, 2016, respectively. (4) The interest and amortization and the loss on early extinguishment of debt related to the convertible senior subordinated notes must be added to income from continuing operations when calculating diluted earnings per share because the debt was assumed to have been converted at the beginning of the period, and the applicable shares were included in the diluted share count. (5) New guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” requires entities to record all of the tax effects related to share- based payments at settlement (or expiration) through the income statement. Historically, HealthSouth recorded such tax effects to equity. (6) HealthSouth is providing adjusted earnings per share from continuing operations attributable to HealthSouth (“adjusted earnings per share”), which is a non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to prior periods given that it excludes the impact of government, class action, and related settlements, professional fees - accounting, tax, and legal, mark-to-market adjustments for stockappreciation rights, gains or losses related to hedging instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims), items related to corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operating performance. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company's ongoing operating performance. Accordingly, they can complicate comparisons of the Company's results of operations across periods and comparisons of the Company's results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.* (7) In connection with the Encompass acquisition, the Company granted stock appreciation rights based on the common stock of HealthSouth Home Health Holdings, Inc. to certain members of Encompass management. The fair value of Holdings’ common stock is determined using the product of the trailing 12-month specified performance measure for Holdings and a specified median market EBITDA multiple based on a basket of public home health companies. The fair value of these stock appreciation rights will vary from period to period based on Encompass’ performance and the change in the multiple of the basket of public home health companies. * Reconciliations to GAAP provided on pages 37-45

47 End Notes, con’t. (8) Definition of adjusted free cash flow, which is a non-GAAP measure, is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, dividends paid on preferred stock, distributions to noncontrolling interests, and certain other items deemed to be non-indicative of ongoing operating performance. Common stock dividends are not included in the calculation of adjusted free cash flow. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. Note: Adjusted free cash flow for prior periods has been recast to conform to the new guidance in ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” HealthSouth’s stock-based compensation plans permit shares to be withheld to pay the employee’s tax withholding obligations incurred in connection with the vesting of a stock award. HealthSouth then remits the value of those withheld shares in cash to the applicable tax authority on the employee’s behalf. Under the new guidance, all cash payments made to taxing authorities on employees’ behalf for shares withheld should be presented as a financing activity in the statement of cash flows. Historically, HealthSouth presented such payments as an operating activity. (9) 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 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. (10) On July 21, 2016, the board of directors approved a $0.01 per share, or 4.3%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.24 per common share. On July 20, 2017, the board of directors approved a $0.01 per share, or 4.2%, increase tothe quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.25 per common share. (11) The Medicare Access and CHIP Reauthorization Act of 2015 mandated a market basket update of +1.0% in 2018 for post-acute providers including rehabilitation hospitals as well as home health and hospice agencies. (12) The Company estimates the expected impact of each rule utilizing, among other things, the acuity of its patients over the 8-month (home health segment) to 12- month (inpatient rehabilitation segment) period prior to each rule’s release and incorporates other adjustments included in each rule. These estimates are prior to the impact of sequestration. (13) HealthSouth acquired an additional 30% equity interest in Fairlawn Rehabilitation Hospital in Worcester, MA from its joint venture partner. This transaction increased HealthSouth’s ownership interest from 50% to 80% and resulted in a change in accounting for this hospital from the equity method to a consolidated entity effective June 1, 2014. (14) Data provided by Uniform Data System for Medical Rehabilitation, a division of UB Foundation Activities, Inc., a data gathering and analysis organization for the rehabilitation industry; represents ~70% of industry, including HealthSouth sites Adjusted Free Cash Flow As Previously Reported Payroll Taxes Paid Reclassified to Financing Activities As Currently Reported Q1 2016 $ 129.5 $ 9.9 $ 139.4 Q2 2016 115.3 — 115.3 Q3 2016 139.8 — 139.8 Q4 2016 78.3 1.7 80.0 FY 2016 $ 462.9 $ 11.6 $ 474.5 FY 2015 $ 389.0 $ 17.2 $ 406.2

48 End Notes, con’t. (15) Represents discharges from 125 consolidated hospitals in Q3 2017; 124 consolidated hospitals in Q2 2017; 122 consolidated hospitals in Q1 2017 and Q4 2016; 121 consolidated hospitals in Q3 2016; 120 consolidated hospitals in Q2 2016; and 121 consolidated hospitals in Q1 2016 (16) Excludes approximately 440 full-time equivalents in the 2017 periods and approximately 420 full-time equivalents in the 2016 periods presented 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 table represent HealthSouth employees who participate in or support the operations of the Company’s hospitals. (17) 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. (18) Represents home health admissions from 196 consolidated locations in Q3 2017; 191 consolidated locations in Q2 2017 and Q1 2017; 186 consolidated locations in Q4 2016; 188 consolidated locations in Q3 2016; 187 consolidated locations in Q2 2016; and 184 consolidated locations in Q1 2016 (19) Represents hospice admissions from 37 locations in Q3 2017 and Q2 2017; 35 locations in Q1 2017 and Q4 2016; 33 locations in Q3 2016; 29 locations in Q2 2016; and 27 locations in Q1 2016 (20) In March 2006, the Company completed the sale of 400,000 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. In Q4 2013, the Company exchanged $320 million of newly issued 2.0% Convertible Senior Subordinated Notes due 2043 for 257,110 shares of its outstanding preferred stock. In April 2015, the Company exercised its rights to force conversion of all outstanding shares of its preferred stock. On the conversion date, each outstanding share of preferred stock was converted into 33.9905 shares of common stock, resulting in the issuance of 3,271,415 shares of common stock. (21) In November 2013, the Company closed separate, privately negotiated exchanges in which it issued $320million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. The Company recorded ~$249 million as debt and ~$71 million as equity. In May 2017, the Company provided notice of its intent to redeem all $320 million of outstanding convertible notes. In lieu of receiving the redemption price, the holders had the right to convert their notes into shares of the Company’s common stock at a conversion rate of 27.2221 shares per $1,000 principal amount of Notes, which rate was increased by a make-whole premium. In the aggregate, holders of $319.4 million in principal elected to convert, which resulted in the Company issuing 8,895,483 shares of common stock (approximately 8.6 million shares were previously included in the diluted share count). The remaining $0.6 million of principal was redeemed by cash payment. (22) The agreement to settle the Company’s class action securities litigation received final court approval in January 2007. The 5.0 million shares of common stock and warrants to purchase ~8.2 million shares of common stock at a strike price of $41.40 (expired January 17, 2017) related to this settlement were issued on September 30, 2009. The 5.0 million common shares are included in the basic outstanding shares. The warrants were not included in the diluted share count prior to 2015 because the strike price had historically been above the market price. In full-year 2016 and full-year 2014, zero shares related to the warrants were included in the diluted share count due to antidilution based on the stock price. In full-year 2015, 80,814 shares related to the warrants were included in the diluted share count using the treasury stock method.

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