LifeCare Holdings, Inc. Announces Third Quart...(ary adjustmentswhich are not to exceed a...),Health

Date:11/14/2007

ary 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. Copyright©2007 PR Newswire. All rights reserved

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