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LifeCare Holdings, Inc. Announces Third Quarter Results
Date:11/14/2007

PLANO, Texas, Nov. 14 /PRNewswire/ -- LifeCare Holdings, Inc. (the "Company") today announced its operating results for the three- and nine-month periods ended September 30, 2007.

Three Months Ended September 30, 2007

Net Revenues

Our net patient service revenue of $77.6 million for the three months ended September 30, 2007, increased by $0.1 million as compared to the same period in 2006. Patient days increased by 289 during the 2007 period. During the three months ended September 30, 2007, our net patient service revenue per patient day was $1,394 as compared to $1,400 per patient day for the same period in 2006, which represents a decrease of 0.4%. This decrease on a per patient day basis was primarily the result of the recent unfavorable reimbursement changes implemented by CMS during 2006 and 2007.

Expenses

Total expenses increased by $11.6 million to $92.6 million for the three months ended September 30, 2007 as compared to $81.0 million for the comparable period in 2006.

Of this $11.6 million increase in total expenses, $3.8 million related to goodwill impairment charges and $2.5 million was attributable to compensation and benefits accrued in connection with the departure of the CEO during the three months ended September 30, 2007. Rent expense increased by $1.0 million during the 2007 period in connection with the increases in bed capacity. Net interest expense increased by $0.4 million during the 2007 period from an increase in LIBOR rates and the increased margin spread as the result of the amendment to our senior secured credit facility discussed further in the Liquidity and Capital Resources section contained herein. The remaining unfavorable variance of $3.9 million was related to increases in salaries, wages and benefits, supplies, outside services and contract labor expenses incurred as the result of inflationary increases and the increases in bed capacity.

Credit Agreement EBITDA

For the quarterat are effective for discharges occurring on or after July 1, 2007. The final rule was amended on June 29, 2007 by revising the high cost outlier threshold. CMS estimates these changes will reduce overall payments to LTAC hospitals by 1.2% in the first year of implementation. These changes include: (a) a 0.71% increase to the standard federal payment rate from $38,086 to $38,356; (b) revisions to payment methodologies impacting short-stay outliers; (c) adjustments to the wage index component of the federal payment; (d) an extension of the policy known as the "25 Percent Rule" to all LTAC hospitals, including those previously exempted due to a "grandfather status," with a three year phase-in; and (e) an increase in the high-cost outlier fixed-loss threshold amount from $14,887 to $20,738. The proposed short-stay outlier revisions include the creation of a new payment category for discharged cases having lengths of stay less than or equal to the geometric mean length of stay for patients with the same diagnosis in short-term acute care hospitals. Payment for these cases would be similar to that received by a short-term acute care hospital for the same diagnosis.

CMS also states that the annual update to the DRG classifications and relative weights will be made in a budget neutral manner, effective October 1, 2007. As such, the estimated aggregate industry LTAC PPS payments would be unaffected by the annual recalibration of DRG payment weights.

While we believe that the new policy will reduce our Medicare reimbursement, we will attempt to mitigate the effect of these recent regulatory changes. There can be no guarantee that such efforts will be successful.

CMS Changes to DRG Weighting for Fiscal 2008

On August 1, 2007, CMS issued final inpatient prospective payment system (IPPS) regulations for fiscal year 2008. These regulations establish a new Medicare severity-based patient classification system for fiscal year 2008, called the Medicare-Severity DRGs (or MS-DRGs) or MS-LTAC-DRGs for LTAC hospitals. The MS-LTAC-DRG system creates additional severity-adjusted categories for most diagnoses, resulting in an expansion of the number of DRGs from 538 to 745. CMS states that MS-LTAC-DRG weights were developed in a budget neutral manner and as such, the estimated aggregate payments under LTAC PPS would be unaffected by the annual recalibration of MS-LTAC-DRG payment weights. CMS has provided for a two-year phase-in period to mitigate the transition in payments for IPPS and LTAC PPS providers. In fiscal 2008 provider reimbursement will be based 50% on new MS-LTAC-DRGs and 50% on existing DRGs. For fiscal 2009 100% will be based on new MS-LTAC-DRGs. We are not certain what impact these regulations will have on our operations and financial performance in future periods.

Forward-Looking Statements

This press release includes forward-looking statements regarding, among other items, operations, proposed regulations and their possible effect on the Company's results. Such statements are subject to a number of uncertainties and risks that could significantly affect current plans. Furthermore, actual results may differ materially from those experienced or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, risks relating to operating in a regulated environment, failure to maintain compliance with our debt covenants, implementing our business plan, maintaining relationships with physicians in our markets, availability of sufficient nurses and therapists, competition, retaining key management, ability to service our debt requirements, litigation matters and availability of insurance. Further information about factors that could affect the Company's financial and other results is included in our Form 10-K as filed on April 2, 2007, which can be viewed on the SEC's website. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. As a result, you should not place undue reliance on forward-looking statements, which reflect management's views only as the date hereof. The Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Credit Agreement EBITDA is used in the calculations of the interest coverage and leverage ratios that are included in the covenants contained in our existing senior secured credit agreement. Credit Agreement EBITDA is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation or as a substitute for operating income, net income, cash flows from operations or other statement of operations or cash flow data prepared in conformity with GAAP, or as measures of profitability or liquidity. In addition the calculation of Credit Agreement EBITDA is susceptible to varying interpretations and calculation, and the amounts presented may not be comparable to similarly titled measures of other companies. Credit Agreement EBITDA may not be indicative of historical operating results, and we do not mean for it to be predictive of future results of operations or cash flows. For the trailing 12-month period ended September 30, 2007, Credit Agreement EBITDA was $46.0 million, including the $6.0 million cure discussed previously.

LifeCare, based in Plano, Texas, operates 19 long term acute care hospitals located in nine states. Long term acute care hospitals specialize in the treatment of medically complex patients who typically require extended hospitalization. For more information on LifeCare, visit our website at http://www.lifecare-hospitals.com.

Schedule 1

Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2006 and 2007

(In thousands)

(Unaudited)

%

2006 2007 Change

Net patient service revenue $77,437 $77,553 0.1%

Expenses:

Salaries, wages and benefits 36,224 40,389 11.5%

Supplies 8,027 8,191 2.0%

Rent 4,714 5,712 21.2%

Other operating expense 19,297 21,180 9.8%

Provision for doubtful accounts 1,326 1,404 5.9%

Depreciation and amortization 2,948 2,952 0.1%

Goodwill impairment charges - 3,834 NM

72,536 83,662 15.3%

Operating income (loss) 4,901 (6,109) -224.6%

Interest expense, net 8,502 8,967 5.5%

Equity in loss of joint venture - (106) NM

Loss before income taxes (3,601) (15,182) 321.6%

Provision for income taxes (215) (1,953) 808.4%

Net loss $(3,386) $(13,229) 290.7%

Reconciliation to Credit Agreement EBITDA:

Operating income (loss) - per above $4,901 $(6,109)

Adjusted for:

Depreciation and amortization 2,948 2,952

Goodwill impairment charges - 3,834

Stock compensation expense 287 194

Severance - 2,468

Cost saving initiatives 153 195

South Texas closure/relocation 956 -

Start-up losses 490 1,283

Sarbanes Oxley implementation - 249

New Orleans operations 230 18

Other credit agreement add-back items 542 (388)

Credit Agreement EBITDA 10,507 4,696

Exercise of cure right for quarter

ended September 30, 2007 - 5,999

Pro Forma Credit Agreement EBITDA $10,507 $10,695

Schedule 2

Condensed Consolidated Statements of Operations

For the Nine Months Ended September 30, 2006 and 2007

(In thousands)

(Unaudited)

%

2006 2007 Change

Net patient service revenue $246,014 $242,475 -1.4%

Expenses:

Salaries, wages and benefits 108,575 117,604 8.3%

Supplies 24,863 24,951 0.4%

Rent 13,539 15,691 15.9%

Other operating expense 60,119 63,286 5.3%

Provision for doubtful accounts 4,288 4,287 0.0%

Depreciation and amortization 8,802 8,685 -1.3%

Goodwill impairment charges 24,600 3,834 NM

Insurance recovery (5,333) - NM

239,453 238,338 -0.5%

Operating income 6,561 4,137 -36.9%

Interest expense, net 24,585 26,466 7.7%

Gain on early extinguishment of debt (1,329) - -100.0%

Equity in loss of joint venture - (448) NM

Loss before income taxes (16,695) (22,777) 36.4%

Provision for income taxes 4,509 (2,652) -158.8%

Net loss $(21,204) $(20,125) -5.1%

Reconciliation to Credit Agreement EBITDA:

Operating income - per above $6,561 $4,137

Adjusted for:

Depreciation and amortization 8,802 8,685

Goodwill impairment charge 24,600 3,834

Stock compensation expense 468 526

Severance 779 2,918

Cost report adjustment 3,871 -

Cost saving initiatives 679 2,280

South Texas closure/relocation 1,074 -

Start-up losses 1,468 2,218

Sarbanes Oxley implementation - 1,111

Shreveport campus closure - 543

New Orleans operations, net of

proceeds (3,869) 92

Other credit agreement add-back items 983 137

Credit Agreement EBITDA 45,416 26,481

Exercise of cure right for quarter

ended September 30, 2007 - 5,999

Pro Forma Credit Agreement EBITDA $45,416 $32,480

Schedule 3

Trailing 12-months Credit Agreement EBITDA

For the 12-month period ended September 30, 2007

(In thousands)

(Unaudited)

Trailing 12-months

ended

September 30, 2007

Reconciliation to Credit Agreement EBITDA:

Net loss $(39,746)

Depreciation and amortization 11,739

Interest expense, net 34,699

Income taxes (3,454)

Goodwill impairment charge 22,834

Stock compensation expense 690

Severance 3,161

Cost saving initiatives 3,354

Start-up losses 1,790

Hospital closures and relocations 1,370

New Orleans operations (including joint

venture losses) 837

Sarbanes Oxley implementation 1,111

Other credit agreement add-back items 1,656

Credit Agreement EBITDA $40,041

Exercise of cure right for quarter ended

September 30, 2007 5,999

Pro Forma Credit Agreement EBITDA $46,040

Schedule 4

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31, September 30,

Assets 2006 2007

Current assets:

Cash and cash equivalents $33,250 $13,571

Accounts receivable, net 67,464 70,586

Income taxes receivable 6,418 8,586

Other current assets 17,662 24,205

Total current assets 124,794 116,948

Property and equipment, net 78,418 78,797

Goodwill and other identifiable

intangibles, net 318,745 317,890

Other assets 14,461 14,534

$536,418 $528,169

Liabilities and Stockholder's Equity

Current liabilities:

Payables and accruals $45,346 $52,567

Estimated third-party payer settlements 8,308 424

Current installments of long-term debt 3,188 2,550

Current installments of obligations

under capital leases 3,925 2,241

Total current liabilities 60,767 57,782

Long-term debt, excluding current

installments 396,262 394,350

Obligations under capital leases,

excluding current installments 1,909 770

Lease financing obligation - 12,052

Accrued insurance 5,902 6,427

Other noncurrent liabilities 21,080 22,062

Total liabilities 485,920 493,443

Stockholder's equity 50,498 34,726

$536,418 $528,169

Schedule 5

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2006 and 2007

(In thousands)

(Unaudited)

2006 2007

Cash flows from operating activities:

Net loss $(21,204) $(20,125)

Adjustments to reconcile net loss to net

cash provided by (used in) operating activities:

Depreciation and amortization 9,691 9,865

Provision for doubtful accounts 4,288 4,287

Impairment charges 24,600 3,834

Gain on early extinguishment of debt (1,329) -

Equity in loss of joint venture - 448

Deferred income taxes (2,933) 2,087

Equity compensation amortization 467 519

Changes in operating assets and liabilities:

Patient accounts receivable (10,622) (7,409)

Other current assets 15,590 (3,123)

Other assets (1,429) (131)

Estimated third-party payer settlements 12,209 (7,884)

Accounts payable and accrued expenses (398) 3,322

Other liabilities 6,295 1,509

Net cash provided by (used in)

operating activities 35,225 (12,801)

Cash used in investing activities:

Purchases of property and equipment (16,000) (37,252)

Sale leaseback proceeds 788 26,669

Net cash used in investing activities (15,212) (10,583)

Cash flows provided by (used in) financing activities:

Deferred financing costs - (1,089)

Lease financing obligation proceeds - 10,466

Payments of notes payable and long-term debt (3,443) (2,550)

Payments on obligations under capital leases (4,212) (3,122)

Net cash provided by (used in)

financing activities (7,655) 3,705

Net increase (decrease) in cash and

cash equivalents 12,358 (19,679)

Cash and cash equivalents, beginning of period 19,843 33,250

Cash and cash equivalents, end of period $32,201 $13,571

Schedule 6

Selected Operating Statistics

Three months Three months

ended September 30, ended September 30,

2006 2007

Number of hospitals within

hospitals (end of period) 13 9

Number of freestanding hospitals

(end of period) 6 10

Number of total hospitals

(end of period) 19 19

Licensed beds (end of period) 894 1,008

Average licensed beds (1) 867 976

Admissions 2,033 1,972

Patient days 55,327 55,616

Occupancy rate 69.4% 61.9%

Percent net patient service

revenue from Medicare 72.0% 60.3%

Percent net patient service

revenue from commercial

payors and Medicaid (2) 28.0% 39.7%

Net patient service revenue

per patient day $1,400 $1,394

Nine months Nine months

ended September 30, ended September 30,

2006 2007

Number of hospitals within

hospitals (end of period) 13 9

Number of freestanding hospitals

(end of period) 6 ended September 30, 2007, adjusted EBITDA as defined in the credit agreement to our senior secured credit facility, which we refer to as Credit Agreement EBITDA, was $4.7 million, which is a decrease of $5.8 million, or 55.3% from the prior year period. Credit Agreement EBITDA reflects the elimination of goodwill impairment charges, start-up costs and certain other non-recurring/operational expenditures as defined in our credit agreement. The decrease in Credit Agreement EBITDA, on a dollar and percentage of net patient service revenue basis from the same period in the prior year, was primarily due to the increase in expenses discussed previously. However, for the quarter ended September 30, 2007, we exercised a cure right as provided in the credit agreement whereby pro forma adjusted EBITDA for financial covenant tests as of September 30, 2007 was increased by $6.0 million to $10.7 million on a pro forma basis. See additional discussion regarding this cure right in the Liquidity and Capital Resources section contained herein.

Nine Months Ended September 30, 2007

Net Revenues

Our net patient service revenue decreased by $3.5 million, or 1.4%, for the nine months ended September 30, 2007, to $242.5 million from $246.0 million for the comparable period in 2006. This decrease in net patient service revenue was comprised of a $2.3 million favorable benefit from a 0.9% increase in patient days and an unfavorable $8.6 million variance as the result of decreased revenue per patient day, offset by a net increase of $2.8 million attributable to a decrease in unfavorable adjustments related to previously filed cost reports.

During the nine months ended September 30, 2007 and 2006, we recorded reductions in net patient service revenue of $0.7 million and $3.6 million, respectively, related to changes in estimates and settlements on cost reports filed with the Medicare program. The adjustment recognized during the nine months ended September 30, 2006 re 10

Number of total hospitals

(end of period) 19 19

Licensed beds (end of period) 894 1,008

Average licensed beds (1) 884 944

Admissions 6,219 5,868

Patient days 170,453 172,042

Occupancy rate 70.6% 66.8%

Percent net patient service

revenue from Medicare 71.5% 64.3%

Percent net patient service

revenue from commercial

payors and Medicaid (2) 28.5% 35.7%

Net patient service revenue

per patient day $1,443 $1,409

(1) The licensed beds are only calculated on the beds at locations that

were open for operations during the applicable period, and exclude beds at

locations prior to openings, or subsequent to closures.

(2) The percentage of net patient service revenue from Medicaid is less

than one percent for each of the periods presented.

lated to two of the Company's hospitals. In these cases, the actual cost to charge ratio, which is used to determine the reimbursement for short stay and high cost outliers, was outside the 10% limit of the cost to charge ratio amount used by CMS to process interim claims such that it resulted in a reconciliation of payments to the actual cost to charge ratio for these cost report periods.

Our net patient service revenue per patient day as reported during the nine months ended September 30, 2007 and 2006, was $1,409 and $1,443, respectively. However, exclusive of the cost report reimbursement adjustments discussed previously, net patient service revenue per patient day for the nine months ended September 30, 2007 and 2006 was $1,414 and $1,464, respectively. The decrease in net patient service revenue per patient day, excluding the impact of the cost report reimbursement adjustment, was primarily the result of the unfavorable reimbursement changes implemented by CMS for all discharges on or after July 1, 2006 and the unfavorable reduction in DRG weights for all discharges on or after October 1, 2006, partially offset by an increase in the percentage of our revenues generated from commercial payors.

Total Expenses

Total expenses decreased by $2.1 million to $264.8 million for the nine months ended September 30, 2007 as compared to $262.7 million for the comparable period in 2006. Included in the expenses for the nine month period ending September 30, 2007, is a $3.8 million impairment charge related to goodwill and $2.5 million attributable to compensation and benefits accrued in connection with the departure of the CEO during the three months ended September 30, 2007, as discussed previously. Included in the expenses for the 2006 period is an impairment charge of $24.6 million related to goodwill, a gain of $1.3 million related to the early extinguishment of debt, and $5.3 million in insurance recovery related to Hurricane Katrina. Gain on early extinguishment of debt for the nine months ended September 30, 2006 was the result of our repurchasing $3 million in face of our senior subordinated notes for an amount approximating $1.5 million. Partially offsetting the gain was the write-off of capitalized financing cost of $0.1 million recorded in connection with the retirement of these senior subordinated notes.

Excluding the impairment charge and the compensation and benefits accrual for 2007, and the impairment charge, gain on early extinguishment of debt, and the insurance recovery for 2006, expenses increased by $13.7 million from the same period in prior year. Rent expenses increased by $2.1 million during the 2007 period in connection with the increases in bed capacity. Net interest expense increased by $1.9 million during the 2007 period from an increase in LIBOR rates and the increased margin spread as the result of the amendment to our senior secured credit facility discussed further in the Liquidity and Capital Resources section contained herein. The remaining $9.7 million increase in expenses was primarily attributable to an increase in salaries, wages and benefits of $6.5 million, and an increase in outside services, contract labor and other operating expenses of $3.2 million. These increases were due to the result of inflationary increases and the increases in bed capacity and patient days.

Credit Agreement EBITDA

For the nine months ended September 30, 2007, Credit Agreement EBITDA, was $26.5 million, a decrease of $18.9 million, or 41.7% from the prior year period. The decrease in Credit Agreement EBITDA, on a dollar and percentage of net patient service revenue basis, was primarily due to the reduction in revenues associated with the CMS regulatory changes and the increase in expenses discussed previously. However, for the quarter ended September 30, 2007, we exercised a cure right as provided in the credit agreement whereby pro forma adjusted EBITDA for the nine months ended September 30, 2007 for financial covenant tests as of September 30, 2007 was increased by $6.0 million to $32.5 million on a pro forma basis. See additional discussion regarding this cure right in the Liquidity and Capital Resources section contained herein.

Liquidity and Capital Resources

At September 30, 2007, our outstanding indebtedness consisted of $147.0 million aggregate principal amount of senior subordinated notes, a $249.9 million term loan facility with a maturity of seven years, and capital lease obligations of $3.0 million with varying maturities.

The senior secured credit facility requires us to comply on a quarterly basis with certain financial covenants, including an interest coverage ratio test and a maximum leverage ratio test, which will become more restrictive over time. In addition, the senior secured credit facility includes various negative covenants, including limitations on indebtedness, liens, investments, permitted businesses, restricted payments, transactions with affiliates and other matters, as well as certain customary representations and warranties, affirmative covenants and events of default including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect, change of control, and certain other provisions.

On May 2, 2007, we entered into Amendment No. 1 for the senior secured credit facility ("Amendment No. 1"). Amendment No. 1 modified certain financial covenants effective March 31, 2007 and increased the spread on the variable interest rate to be paid by the Company. Based upon amounts presently outstanding under the senior secured credit facility and current interest rates, Amendment No. 1 will result in an increase in annual interest expense of approximately $1.9 million.

The interest rates per annum applicable to loans, other than swingline loans, under our senior secured credit facility are, at our option, equal to either an alternate base rate or an adjusted LIBOR rate for a one-, two-, three- or six-month interest period, or a nine- or twelve-month period if available, in each case, plus an applicable margin. The applicable margins on the loans as amended are currently (1) 2.25% for alternate base rate revolving loans, (2) 3.25% for adjusted LIBOR revolving loans, (3) 2.25% for alternate base rate term loans, and (4) 3.25% for adjusted LIBOR term loans. These margins are subject to reduction based upon the ratio of our total indebtedness to our consolidated adjusted EBITDA (as defined in the credit agreement governing our senior secured credit facility and Amendment Number 1 to the credit agreement). At September 30, 2007, the interest rate applicable to the $249.9 million under our term loan facility was 8.20%.

As of September 30, 2007 we were not in compliance with the financial covenant requirements as set forth in the credit agreement for the Facility. However, this event of non-compliance was cured on November 14, 2007 through the exercise of a cure right as provided for in the credit agreement. The cure right provides us the right to issue permitted cure securities in exchange for cash or otherwise receive cash that would be contributed to our capital in an amount that is necessary to satisfy the financial covenant requirement on a pro-forma basis. The cure right capital contribution amount is considered additional consolidated EBITDA, as defined in our credit agreement, for purposes of measuring compliance with the financial covenants for our fiscal quarter ended September 30, 2007. In subsequent periods, this cure amount will continue to be considered a component of consolidated EBITDA on a trailing four-quarter calculation basis. Additionally, the cure amount is limited such that it can be no greater than the amount required for purposes of complying with the financial covenants nor can this cure right be exercised more than two times in any trailing four-quarter period.

The cure right cash contribution necessary to cure our non-compliance with the financial covenants tested as of September 30, 2007, which was $6.0 million, was received by our ultimate parent company, which we refer to as Holdings, from affiliates of The Carlyle Group, on November 14, 2007. Holdings in turn contributed these funds to the capital of the Company through certain intermediate subsidiaries. As a result of the exercise of this cure, we are currently in compliance with the covenants of the credit agreement as amended, and we are deemed to have satisfied the requirements of such financial covenants as of September 30, 2007.

On November 7, 2007, we announced that we would be seeking an amendment to our credit agreement that would address, among other items, future covenant requirements. There can be no assurance that we will be able to obtain any amendment to our credit agreement on the terms to be proposed by us or at all. If we are able to execute an amendment and obtain a waiver, it is likely we will incur one-time fees and expenses, and will be required to pay a higher interest margin on our outstanding indebtedness in subsequent periods.

We may not able to continue to satisfy the covenant requirements in subsequent periods. If we are unable to maintain compliance with the covenants contained in our senior secured credit facility, an event of default would occur. During the continuance of an event of a default, the lenders under the senior secured credit facility are entitled to take various actions, including accelerating amounts due under the senior secured credit facility, terminating our access to our revolving credit facility and all other actions permitted to be taken by a secured creditor. An event of default could have a material adverse effect on our financial position, results of operations and cash flow.

We believe that our cash on hand, expected cash flows from operations, potential availability of borrowings under the revolving portion of our senior secured credit facilities, and funds available under the Master Lease will be sufficient to finance our operations, and meet our scheduled debt service requirements for at least the next twelve months.

On May 2, 2007, LifeCare REIT 1, Inc. ("Tenant"), a subsidiary of the Company entered into a Master Lease Agreement ("Lease") with Health Care REIT, Inc. and HCRI Texas Properties, LTD (collectively, the "Landlord") in connection with the sale and leaseback of a 62-bed long term acute care hospital being constructed by the Company in San Antonio, Texas ("San Antonio Facility"). As of Sept 30, 2007, the San Antonio Facility opened for business, at which point the operational lease commenced. The base rent is approximately $1.2 million per year, and is subject to annual inflationary adjustments. The inflationary adjustments, which are not to exceed a cumulative average of 0.25% per annum, are tied to the Medicare long term acute care market basket inflation rate, as determined by the Centers for Medicare and Medicaid Services. As of September 30, 2007, the Landlord had made payments of $13.6 million to the Company towards the estimated total purchase price of $15.7 million for the San Antonio Facility. No gain will be recognized from this transaction.

On June 6, 2007, Tenant amended the Master Lease Agreement ("Amended Lease") with Health Care REIT, Inc., HCRI Texas Properties, LTD and HCRI Wisconsin Properties, LLC (collectively, the "Milwaukee Landlord") to include the sale and leaseback of a 62-bed long term acute care hospital being constructed by the Company in Milwaukee, Wisconsin ("Milwaukee Facility"). The base rent is approximately $2.5 million per year, and is subject to annual inflation adjustments. The inflationary adjustments, which are not to exceed a cumulative average of 0.25% per annum, are tied to the Medicare long term acute care market basket inflation rate, as determined by the Centers for Medicare and Medicaid Services. As of September 30, 2007, the Milwaukee Landlord had made payments of $19.1 million to the Company towards the estimated total purchase price of $25.6 million for the Milwaukee Facility. No gain will be recognized from this transaction.

The initial term of the leases for these facilities will be 15 years, and the Tenant has one 15-year renewal option. The initial rent under the Amended Lease will be computed based on a predetermined spread over the rate of a 15-year U.S. Treasury Note and will be subject to an annual inflation adjustment. The Lease is an "absolute net lease" and contains customary covenants, representations and warranties. The Company and its subsidiary, LifeCare Hospitals of Milwaukee, Inc. and San Antonio Specialty Hospitals, LTD, entered into an Amended and Restated Unconditional and Continuing Lease Guaranty with the Landlord.

We entered into a separate Master Lease Agreement with Health Care REIT, Inc. on September 1, 2006, to acquire and develop hospital facilities. The first facility to be developed under this Master Lease is our Boise, Idaho facility, which is currently under construction. The total project cost of this facility is expected to approximate $18.5 million. Through September 30, 2007, we have incurred capital expenditure of $12.1 million for the facility, and Health Care REIT, Inc. has made payments to us approximating $10.5 million as reimbursement for these capital expenditures. This particular facility under this Master Lease will be accounted for as a lease financing obligation with the asset remaining capitalized upon completion.

CMS Fiscal 2008 Changes

Medicare Reimbursement Changes for Fiscal 2008

On May 1, 2007, CMS issued changes to the Medicare hospital payment system th
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SOURCE LifeCare Holdings, Inc.
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(Date:2/11/2016)... ... February 11, 2016 , ... “ HEALING MIND : Five Steps ... Mind” (published by Balboa Press) teaches readers how to become their own therapist. Providing ... author Janice McDermott, M.Ed., LCSW, offers an understanding of how to heal one’s inner ...
(Date:2/11/2016)... ... February 11, 2016 , ... ... use the action analytics leader’s population health solutions, MDinsight® and IndiGO®, for its ... the Atlanta-area healthcare system. Details of the contract were not disclosed. , As ...
Breaking Medicine News(10 mins):
(Date:2/12/2016)... SEOUL, South Korea , Feb. ... Macrogen, Inc. today announced they will form a ... for precision medicine in cancer. The goal of ... digital-sorting technology with Macrogen,s high-throughput Next Generation Sequencing ... the Clinical Laboratory Improvement Amendments (CLIA) of 1988 ...
(Date:2/12/2016)... 2016  OMS Supply, a large provider of oral ... today the recent launching of their new company website. ... features that enhance the user experience and enable practitioners ... --> --> Despite the ... that started in early 2016, they have already made ...
(Date:2/12/2016)... BUDAPEST , Ungarn, February 12, 2016 ... ein Medizintechnikunternehmen, das sich auf den ungedeckten ... gab heute positive Ergebnisse seines klinischen Forschungsprogramms ... und Asthma-Patienten beschäftigt, ergab Verbesserungen ihrer respiratorischen ... Indiso ltd , ein Medizintechnikunternehmen, das ...
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