8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (date of earliest event reported): June 23, 2010

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)	(I.R.S. Employer Identification No.)

3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243

(Address of Principal Executive Officers, Including Zip Code)

(205) 967-7116

(Registrant’s telephone number)

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 communications 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))

ITEM 7.01. Regulation FD Disclosure.

HealthSouth Corporation (“HealthSouth” or the “Company”) will participate in the 2010 Wells Fargo Securities Healthcare Conference in Boston, Massachusetts on June 23-24, 2010. As part of this conference, representatives of HealthSouth will make a presentation on June 24, 2010 at 1:30 p.m. ET using the slides attached to this Current Report on Form 8-K as Exhibit 99.1. The presentation will address, among other things, the Company’s strategy, objectives, financial performance, and development process and discuss industry trends and dynamics. The presentation will be webcast live and will be available at http://investor.healthsouth.com by clicking on an available link.

While the format of certain slides may have changed, the slide presentation attached to this Current Report on Form 8-K as Exhibit 99.1 contains substantially the same information as previously provided in the Current Reports on Form 8-K dated May 19, 2010 and June 9, 2010.

In the slide presentation attached to this Current Report on Form 8-K as Exhibit 99.1, the Company provides the following brief update on its operational performance:

• Good performance through May compared to same period last year

o   Volume: solid in April, soft in May, appears to be rebounding in June;

o   Expenses: continue to be aggressively managed; and

o   Pricing: favorable trend.

In the slide presentation, the Company also notes it began integration of the newly acquired Desert Canyon Rehabilitation Hospital on June 1, 2010 and the newly built hospital in Loudoun County, Virginia began accepting patients on June 14, 2010.

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

The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The furnishing of this report is not intended to constitute a determination by the Company that the information is material or that the dissemination of the information is required by Regulation FD.

Note Regarding Presentation of Non-GAAP Financial Measures

The financial data contained in the presentation include non-GAAP financial measures, including the Company’s leverage ratio and Adjusted Consolidated EBITDA. The Company’s leverage ratio is defined in its credit agreement as the ratio of consolidated total debt to Adjusted Consolidated EBITDA for the trailing four quarters. The Company continues to believe both its leverage ratio and Adjusted Consolidated EBITDA as defined in its credit agreement are measures of its ability to service its debt and its ability to make capital expenditures.

The Company uses Adjusted Consolidated EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing 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 Note 8, Long-term Debt, to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”). These covenants are material terms of the credit agreement, and the credit agreement represents a substantial portion of the Company’s capitalization.

Non-compliance with these financial covenants under the credit agreement – its interest coverage ratio and its leverage ratio – could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might not be on terms favorable to those in the Company’s existing credit agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted Consolidated EBITDA is critical to the Company’s assess ment of its liquidity.

In general terms, the definition of Adjusted Consolidated EBITDA, per the credit agreement, allows the Company to add back to or subtract from consolidated net income unusual non-cash or non-recurring items. These items include, but may not be limited to, (1) amounts associated with government, class action, and related settlements, (2) amounts related to discontinued operations and closed locations, (3) charges in respect of professional fees for reconstruction and restatement of financial statements, including fees paid to outside professional firms for matters related to internal controls and legal fees for continued litigation and support matters discussed in Note 22, Settlements, and Note 23, Contingencies and Ot her Commitments, to the consolidated financial statements accompanying the 2009 Form 10-K and Note 8, Contingencies,to the condensed consolidated financial statements included in Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010 (the “March 2010 Form 10-Q”), (4) stock-based compensation expense, (5) net investment and other income (including interest income), and (6) fees associated with the Company’s divestiture activities.

In accordance with the credit agreement, the Company is allowed to add certain other items to the calculation of Adjusted Consolidated EBITDA, and there may also be certain other deductions required. This includes the interest income associated with income tax recoveries, as discussed in Note 19, Income Taxes, to the consolidated financial statements included in the 2009 Form 10-K. In addition, the Company is allowed to add non-recurring cash gains, such as the cash proceeds from the UBS Settlement (see Note 22, Settlements, to the consolidated financial statements included in the 2009 Form 10-K) to the calculation of Adjusted Consolidated EBITDA. As these adjustments may not be indicative of the Company’s ongoing perfo rmance, they have been excluded from Adjusted Consolidated EBITDA presented herein and included in the slide presentation attached as Exhibit 99.1.

However, Adjusted Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America (“GAAP”), and the items excluded from Adjusted Consolidated EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted Consolidated EBITDA should not be considered a substitute for net incomeor cash flows from operating, investing, or financing activities. The Company reconciles Adjusted Consolidated EBITDA to net income, which reconciliation is set forth in the slide presentation attached as Exhibit 99.1, and to net cash provided by operating activities, which reconciliation is set forth below. Because Adjusted Consolidated EBITDA is not a measurement determi ned in accordance with GAAP and is thus susceptible to varying calculations, Adjusted Consolidated 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 in the 2009 Form 10-K.

The Company also uses adjusted income from continuing operations and the related per share amounts, which amounts are also referred to as “adjusted earnings per share,” as analytical indicators to assess its performance. Management believes the presentation of adjusted income from continuing operations and the related per share amounts provides useful information to management and investors about the Company’s operating business before taking into account certain items that are non-operational or infrequent in nature. These measures are not defined measures of financial performance under GAAP and should not be considered as alternatives to net income and net income per share attributable to HealthSouth common shareholders. Because these measures are not measures determined in accordance with GAAP and are susceptible to varying calculations, they may not be comparable to other similarly titled measures presented by other companies. See the consolidated statements of operations included in the 2009 Form 10-K and the condensed consolidated statements of operations included in the March 2010 Form 10-Q for the GAAP measures of net income, income from continuing operations, and basic and diluted earnings per common share. A reconciliation of net income to adjusted income from continuing operations, and the related per share amounts, is included in the slide presentation attached as Exhibit 99.1.

The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Management believes the presentation of adjusted free cash flow provides investors an efficient means by which they can evaluate the Company’s capacity to reduce debt and pursue development activities. The calculation of adjusted free cash flow is included in the slide presentation attached as Exhibit 99.1. This measure is not a defined measure of financial performance under GAAP and should not be considered 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 flows available 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 other similarly titled measures presented by other companies. See the consolidated statements of cash flows included in the 2009 Form 10-K and the condensed consolidated statements of cash flows included in the March 2009 Form 10-Q for the GAAP measures of cash flows from operating, investing, and financing activities. A reconciliation of net cash provided by operating activities to Adjusted Consolidated EBITDA and adjusted free cash flow is presented below (in millions).

Reconciliation of Net Cash Provided by Operating Activities to Adjusted Consolidated EBITDA

	Three Months Ended						Year Ended			Year Ended
	March 31,						December 31,			December 31,
	2010			2009			2009			2008
Net cash provided by operating activities	$	84.8		$	183.1		$	406.1		$	227.2
Provision for doubtful accounts		(6.9	)		(7.8	)		(33.1	)		(27.0	)
Professional fees-accounting, tax, and legal		2.9			4.8			8.8			44.4
Interest expense and amortization of debt
discounts and fees		30.5			34.4			125.8			159.5
UBS Settlement proceeds, gross		-			(100.0	)		(100.0	)		-
Equity in net income of nonconsolidated affiliates		2.6			2.5			4.6			10.6
Net income attributable to noncontrolling
interests in continuing operations		(9.8	)		(8.3	)		(33.4	)		(29.8	)
Amortization of debt discounts and fees		(1.7	)		(1.6	)		(6.6	)		(6.5	)
Distributions from nonconsolidated affiliates		(2.1	)		(1.5	)		(8.6	)		(10.9	)
Current portion of income tax expense (benefit)		2.1			(0.3	)		(7.3	)		(73.8	)
Change in assets and liabilities		0.7			(9.0	)		0.8			53.1
Change in government, class action, and
related settlements liability		0.8			1.7			11.2			7.4
Other operating cash used in (provided by)
discontinued operations		2.2			0.5			13.5			(11.4	)
Other		0.3			(0.1	)		1.2			(1.6	)
Adjusted Consolidated EBITDA	$	106.4		$	98.4		$	383.0		$	341.2

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

	Three Months			Three Months			Year			Year
	Ended			Ended			Ended			Ended
	March 31,			March 31,			December 31,			December 31,
	2010			2009			2009			2008
Net cash provided by operating activities	$	84.8		$	183.1		$	406.1		$	227.2
Impact of discontinued operations		2.2			0.5			13.5			(11.4	)
Net cash provided by operating
activities of continuing operations		87.0			183.6			419.6			215.8
Capital expenditures for maintenance		(5.6	)		(7.5	)		(34.1	)		(42.6	)
Net settlements on interest rate swaps		(11.9	)		(8.5	)		(42.2	)		(20.7	)
Dividends paid on convertible perpetual
preferred stock		(6.5	)		(6.5	)		(26.0	)		(26.0	)
Distributions paid to noncontrolling interests
of consolidated affiliates		(11.1	)		(8.5	)		(32.7	)		(33.4	)
Non-recurring items:
UBS Settlement proceeds, less fees
to derivative plaintiffs' attorneys		-			(73.8	)		(73.8	)		-
Income tax refunds related to prior periods		(6.6	)		(49.0	)		(63.7	)		(90.4	)
Cash paid for:
Professional fees - accounting, tax,
and legal		2.9			4.8			15.3			18.2
Government, class action, and related
settlements		0.8			1.7			11.2			7.4
Adjusted free cash flow	$	49.0		$	36.3		$	173.6		$	28.3

For the three months ended March 31, 2010, net cash used in investing activities was $26.2 million and resulted primarily from capital expenditures, net settlement payments related to interest rate swaps, and an increase in restricted cash offset by proceeds from the sale of the Company’s hospital in Baton Rouge, Louisiana. Net cash used in financing activities during the three months ended March 31, 2010 was $22.7 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, dividends paid on the Company’s convertible perpetual preferred stock, and net debt payments.

For the three months ended March 31, 2009, net cash used in investing activities was $30.2 million and resulted primarily from capital expenditures and net settlement payments related to an interest rate swap. Net cash used in financing activities during the three months ended March 31, 2009 was $94.4 million and resulted primarily from net debt payments made during the period, as well as distributions paid to noncontrolling interests of consolidated affiliates and dividends paid on the Company’s convertible perpetual preferred stock.

For the year ended December 31, 2009, net cash used in investing activities was $133.0 million and resulted primarily from capital expenditures and net settlement payments related to interest rate swaps. Net cash used in financing activities during the year ended December 31, 2009 was $224.3 million and resulted primarily from net debt payments made during the period, as well as distributions paid to noncontrolling interests of consolidated affiliates, dividends paid on the Company’s convertible perpetual preferred stock, and debt amendment and issuance costs.

For the year ended December 31, 2008, net cash used in investing activities was $40.0 million and resulted primarily from capital expenditures, including expenditures associated with development activities, and net settlement payments related to an interest rate swap offset by proceeds from asset disposals, including the Company’s corporate campus. Net cash used in financing activities during the year ended December 31, 2008 was $176.0 million and resulted primarily from net debt payments made during the period, as well as distributions paid to noncontrolling interests of consolidated affiliates and dividends paid on the Company’s perpetual preferred stock, offset by proceeds from the issuance of common stock.

Forward-Looking Statements

The information contained in this Current Report on Form 8-K and the slide presentation attached as Exhibit 99.1 includes certain estimates, projections, and other forward-looking information that reflect the Company’s current views with respect to future events and financial performance. These estimates, projections, and other forward-looking information 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 information will be realized. All such estimates, projections, and forward-looking information speak only as of the date hereof. The Company undertakes no duty to publicly update or revise the information contained herein or in the slide presentation.

The slide presentation also includes estimates and projections published by the Centers for Medicare and Medicaid Services (“CMS”). HealthSouth is not able to verify those estimates or projections or the detailed calculations thereof by CMS which are not made public. Any changes or errors in those calculations, among other uncertainties such as those referred to below and changes in CMS’s own rules and policies, could cause actual results to differ materially from CMS’s projections. Furthermore, the Company does not believe that CMS’s numbers are consistent with financial reporting results. CMS data and projections should not be used as an indication of financial performance.

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking information in this Current Report on Form 8-K or the slide 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 2009 Form 10-K, the March 2010 Form 10-Q, and other documents the Company previously filed with the SEC, many of which are 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

99.1 Slide presentation of HealthSouth Corporation used in connection with the Company’s June 24, 2010 presentation at the 2010 Wells Fargo Securities Healthcare Conference.

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 hereunto duly authorized.

HEALTHSOUTH Corporation
By:	/s/  JOHN P. WHITTINGTON
	Name:       John P. Whittington
	Title:         Executive Vice President, General Counsel, and Corporate Secretary

Dated: June 23, 2010

EX-99.1

1

IRH

LTCH

Sites under construction

Wells Fargo Healthcare Conference

June 23-24, 2010

95 Rehabilitation Hospitals

38Outpatient Rehab Satellite Clinics

6Long-Term Acute Care Hospitals

25Hospital-Based Home Health
Agencies

22,000 Employees

Portfolio

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

Exhibit 99.1

Exhibit 99.1

2

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

There can be no assurance that any estimates, projections or forward-looking information will be realized. All such estimates,
projections and forward-looking information speak only as of the date hereof. HealthSouth undertakes no duty to publicly
update or revise the information contained herein.

This presentation also includes estimates and projections published by the Centers for Medicare and Medicaid Services
(“CMS”). We are not able to verify those estimates or projections or the detailed calculations thereof by CMS which are not
made public. Any changes or errors in those calculations, among other uncertainties such as those referred to below and
changes in CMS’s own rules and policies, could cause actual results to differ materially from CMS’s projections.
Furthermore, we do not believe that CMS numbers are consistent with financial reporting results. CMS data and projections
should not be used as an indication of financial performance.

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 our Form 10-K for the year ended December 31, 2009, and our
Form 10-Q for the quarter ended March 31, 2010, and in other documents we previously filed with the SEC, many of which
are beyond our control, that may cause actual results to differ materially from the views, beliefs and estimates expressed
herein.

Note Regarding Presentation of Non-GAAP Financial Measures
The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities
Exchange Act of 1934. The Appendix at the end of this presentation includes reconciliations of the non-GAAP financial
measures found in the following presentation to the most directly comparable financial measures calculated and presented in
accordance with Generally Accepted Accounting Principles in the United States. Our Form 8-K, dated June 23, 2010,
provides further explanation and disclosure regarding our use of non-GAAP financial measures and should be read in
conjunction with these presentation slides. Our SEC filings, including that Form 8-K, can be found on our website at
http://investor.healthsouth.com/.

Cautionary Statements

Exhibit 99.1

3

Strategy Recap

üPriority:Reduce our leverage and strengthen our balance sheet

-No obvious near-term debt repayment opportunities

-10 ¾ Senior Notes callable June 2011 at 105 ⅜

-2010 focus:growing Adjusted Consolidated EBITDA(1) to reduce leverage

üNear-term:Capitalize on our market-leading position in inpatient
rehabilitation

-Continue to increase market share

-Break ground on a minimum of two new rehabilitation hospitals each year

-Acquire or joint venture a minimum of two IRFs per year

üLonger-term:Prepare for potential expansion into complementary
post-acute services

(1)Reconciliation to GAAP provided on slides 35 and 36.

Exhibit 99.1

4

FIM Gain

LOS Efficiency

LOS Efficiency= Functional gain
divided by length of stay

Source:UDSmr Database - On Demand
Reports:Q1 2010 Report

FIM Gain= Change in Functional
Independent Measurement (based

on an 18 point assessment) from
Admission to Discharge

** Average = Expected, Risk-adjusted LOS Efficiency

* Average = Expected, Risk-adjusted FIM Change Average

Our Differentiation:High-Quality Care

Goal:Teach patients to walk, dress, bathe, eat and
manage daily life in the community.

Exhibit 99.1

5

Our Differentiation:Cost-Effective Care

CMS Fiscal Year 2010 IRF Rate Setting File Analysis (1)

	Freestanding (2)	Units (2)	Total	HealthSouth
				Hospitals (2)
Number of IRFs	228	953	1,181	94
Average # of Discharges per IRF	649	237	316	822
Outlier Payments as % of Total Payments	1.32%	4.08%	3.00%	0.43%
Average Estimated Total Payment per Discharge for FY 2010	$16,452	$16,741	$16,626	$15,996
Average Estimated Cost per Discharge for FY 2010	$14,021	$17,207	$15,945	$12,633

Notes:

(1) All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2010 IRF rate setting final
rule file found at http://www.cms.hhs.gov/InpatientRehabFacPPS/07_DataFiles.asp#TopOfPage. The data presented was developed entirely by
CMS and is based on its definitions which are different in form and substance from the criteria HealthSouth uses for external reporting purposes.
Because CMS does not provide its detailed methodology, HealthSouth is not able to reconstruct the CMS projections or the calculation.

(2)The CMS file contains data for each of the 1,181 inpatient rehabilitation facilities used to estimate the policy updates for the FY 2010 Final IRF-
PPS Rule. Most of the data represents historical information from the CMS fiscal year 2008 period and does not reflect the same HealthSouth
hospitals in operation today. The data presented was separated into three categories: Freestanding, Units, and HealthSouth. HealthSouth is a
subset of Freestanding and the Total.

Exhibit 99.1

6

Discharges

Consolidated Net Operating Revenues

($ Millions)

+3.8%

+1.1%

Dollar Amounts$233.3$241.9$114.1$113.7$21.8$22.5

EPOB (3)3.473.41

Flat despite
wage increase

Flat

90 bps
Improvement

Expenses

(1)

(2)

Solid, Sustained Operating Results

Exhibit 99.1

7

Adjusted Income from Continuing

Operations per Diluted Share (1)

Adjusted Consolidated EBITDA (1)

($ Millions)

+12.3%

(1)Reconciliation to GAAP provided on slides 35 and 36.

Performance Highlights

Solid EBITDA and EPS Growth

+8.1%

+90.8%

+23.1%

Key Drivers:

ü2.5% Medicare market basket increase effective October 1, 2009

üDischarge growth of 1.1% quarter over quarter

üDisciplined expense management

üSolid labor productivity as reflected by EPOB

Exhibit 99.1

8

(1)Notes on page 36.

Performance Highlights:Strong Free Cash Flow

Exhibit 99.1

9

Performance Highlights:Strong Free Cash Flow

Exhibit 99.1

10

•Reminder:On May 4, 2010, based on the results of Q1, the Company
raised its 2010 full-year performance forecast to the high end of the
guidance ranges.

•Good performance through May (volume, expense management and
pricing) compared to same period last year.

§Volume:solid in April, soft in May, appears to be rebounding in June

§Expenses:continue to be aggressively managed

§Pricing:favorable trend

•New Hospitals:

§Began integration of Desert Canyon Rehabilitation Hospital on June 1, 2010

§Began taking patients at HealthSouth Rehabilitation Hospital of Northern
Virginia on June 14, 2010

•As is our policy, full-year guidance will be addressed as part of our
quarterly earnings release.

Performance Update

Exhibit 99.1

11

Summary

üStrong Cash Flows:Directed toward debt reduction and growth.

üContinued Deleveraging:Reduce leverage to between 3.5x and 4.0x
no later than YE 2011.

üGrowth:Above industry volume growth, enhanced by capacity
expansions and adding new hospitals in underserved markets.

üOpportunistic, Disciplined Acquisitions:Complementary IRF
acquisitions and JVs in a fragmented market.

üWell Positioned:High-quality + cost-effective provider; proven track
record of adapting to regulatory changes.

Value Proposition

Business Model:

•5 - 8 % annual Adjusted Consolidated EBITDA growth (1)

•15 - 20% annual Adjusted EPS growth (1) (2)

(1)For reconciliation to GAAP, see slides 35 and 36.

(2)Based on adjusted income from continuing operations per diluted share.

Exhibit 99.1

12

Appendix

Exhibit 99.1

13

•Patients come to HealthSouth with diagnoses of
stroke, brain injury, trauma, neurological conditions,
pulmonary/cardiac disease, amputations and
orthopedic conditions/surgeries.

•~ 72% of inpatient rehabilitation patients are over 65.

•Patients receive 24 hour nursing care, seven days
a week, with at least three hours of therapeutic
intervention, including physical, occupational and
speech therapy.

•Our team includes rehabilitative physicians, physical
therapists, occupational therapists, speech-language
pathologists, rehabilitative nurses, pharmacists,
dieticians and case managers.

•Our goal is to teach patients to walk, dress, bathe,
eat and manage daily life in their community.

About HealthSouth

Our Patients, Our Care and Our Team

Exhibit 99.1

14

Source:Centers for Medicare and Medicaid Services, Office of the Actuary (MedPAC June 2009 Data Book - Page 124)

“The Basics”:Medicare Spending on Post-Acute
Services

•Inpatient rehabilitation
is less than 12% of
Medicare post-acute
spending.

Exhibit 99.1

15

“The Basics”:Our Industry

Sources:FY 2010 CMS Rate Setting File and MedPAC March 2009 report; Internal HLS reports for HLS data

(1)Does not include HealthSouth Rehabilitation Hospital of Northern Virginia.

üHighly fragmented industry

•~ 81% Units

•~ 19% Free-standing

üIndustry mainly nonprofit

•~ 62% Nonprofit

•~ 14% Government

•~ 24% For-profit

üOn average, HLS hospitals tend to
be larger and treat more patients.

~ 8% of IRFs

~ 18% of Licensed Beds

~ 21% of Patients Served

HealthSouth Market Share

Exhibit 99.1

16

“The Basics”:Our Patients (~ 72% are > 65 years old)

94%

5%

1%

Referral Sources

Acute Care Hospitals

Physician Offices

Skilled Nursing Facilities

Admission to an IRF:

Most Common Cases (2009)

1.Stroke17.5%

2.Neurological13.3%

3.Fractureofthelowerextremity11.7%

4.Debility11.5%

5.Knee/Hipreplacement9.6%

6.Otherorthopedicconditions9.5%

7.Braininjury7.4%

8.Cardiacconditions4.7%

9.Spinalcordinjury3.6%

10.Allother11.2%

üPhysicians and acute care hospital case managers are key decision-makers.

üAll IRF patients must meet reasonable and necessary criteria and are admitted by a
physician.

üAll IRF patients must be medically stable and have potential to tolerate three hours of
therapy per day (minimum).

üReceive 24 hour, 7 days a week nursing care.

Exhibit 99.1

17

(1)Data provided by UDSMR, a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry, including 89 HealthSouth sites.

(2)Includes 89 consolidated HealthSouth inpatient rehab hospitals and six long-term acute-care hospitals.

“The Basics”:Discharge Growth - Historical

üHealthSouth’s volume
growth has outpaced
competitors’

üTeamWorks =
standardized sales &
marketing

üCapacity expansions will
help facilitate organic
growth:

•~ 100+ beds will be added
in 2010

(1)

(2)

Exhibit 99.1

18

Business Outlook

3.5x to 4.0x Debt to EBITDA (by YE 2011)

(Exclusive of any E&Y settlement)

Organic growth through capacity
expansion and de novos

($60+ million in 2010)

IRF acquisitions/joint ventures

Deleveraging

Growth

Acquisitions of other,
complementary post-acute services

Reform

1.Pricing

2.Bundling

Sector
Regulation

Pilot/Demonstration
Projects

•LTCH:admission criteria; 25% Rule; MMSEA extension

•Home Health:outliers; reimbursement methodology

Deleveraging, Growth, Reform and Sector Regulation

Market basket minus 25 bpsMarket basket minus 10 bps
and productivity adjustment

2010201120122013

Exhibit 99.1

19

Future Regulatory Risk	IRF	SNF	LTCH	HH
1.Re-basing payment system	No	Yes; RUGS IV delayed until 10/01/11 (per PPACA)	No	Yes; would be required as partof PPACA starting in 2014
2.Major outlier payment adjustments	No	No	Yes; will occur when MMSEA relief expires (short stay outliers)	Yes; 10% cap per agency; 2.5% taken out of outlier pool (per PPACA)
3.Upcoding adjustments	No	Yes; occurring in FY 2010	Yes; occurring in FY 2010 and proposed (-2.5%) for FY 2011	Yes; occurring in CYs 2010 and 2011
4.Patient criteria	No; 60% Rule already in place	No	Study dictated as part of MMSEA	PPACA requires a “face-to-face” encounter between physicians (or clinicians working with them) and patients before HH services are prescribed
5.Healthcare Reform
–Market basket update reductions	–Known	–Known	–Known	–Known
–Productivity adjustments	–Begins 2012	–Begins 2012	–Begins 2012	–Begins 2015
–Bundling	–Pilot to be established by 2013	–Pilot to be established by 2013	–Pilot to be established by 2013	–Pilot to be established by 2013
–Independent Medicare Advisory Board	–FY 2019	–FY 2015	–FY 2019	–CY 2015
–New quality reporting requirements	–Begins 2014	–N/A	–Begins 2014	–N/A
–Value based purchasing	–Pilot begins 2016	–Post 2012	–Pilot begins 2016	–Post 2012
6.Other	N/A	N/A	25% Rule will be reinstituted when MMSEA moratorium expires	N/A

Regulatory Uncertainty

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

Exhibit 99.1

20

Readmission Rates

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

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

Exhibit 99.1

21

Capacity Expansions:

•~ 100+ beds 2010

De novos:

Acquisitions/Joint Ventures:

•Acquired the rehabilitation unit in Altoona, PA, through a
newly formed joint venture and relocated its operations to
one of our hospitals.(Q4 2009)

•Expanded joint venture with St. Vincent Health System
in Little Rock, AR, through the purchase of a 23-bed
rehabilitation unit.(Q1 2010)

•Purchased Desert Canyon Rehabilitation Hospital, a 50-bed
inpatient rehabilitation hospital located in southwest Las
Vegas, NV.(Q2 2010)

Growth

6 - 7 years (2)

2 - 4 years (1)

(1)Average investment per bed: $100K to $250K.

(2)Average investment per bed: ~ $450K.

6 - 7 years

Target Cash pay-back

Exhibit 99.1

22

•Population and
Demographics

•Acute Care Referral
Sources

•Inpatient Rehab
Competition

•SNF Presence

•Payor Environment

•CON/Non-CON

National Market
Assessment

Target
Opportunity

List

(160 Opportunities
Identified)

Existing IRF
Assessment

Corporate
Priority
Assessment

Active
Development
List

Growth:Market Assessment Process

Strategic
Approach

• Buy

• JV

• Build

Regional
President
Assessment

Exhibit 99.1

23

Growth:De Novo Evaluation Process and Cost

CON
Approval

Site
Selection

Cost
Assessment

Proforma
Financials

Execution

•Permitting

•Contract for land

NO

GO

GO

•Cash payback analysis

Target Cash Pay-back
6-7 years

Exhibit 99.1

24

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

Exhibit 99.1

25

Growth:De Novo Timeline

With CON

Without CON

Internal Approval

Day 1

Internal Approval

Day 1

Design

Planning &

Zoning

Groundbreaking

Month 20

Opening
Month 32

Design

Planning &

Zoning

Groundbreaking

Opening
Month 20

Month 11

Exhibit 99.1

26

Debt Profile and Swap Settlement

Debt Maturities

As of March 31, 2010

=Term Loan maturities

=10.75% Fixed

=8.125% Fixed

=Capital leases & term
loan amortization

(1)Based on trailing four quarter Adjusted Consolidated EBITDA of $391.0 million;
reconciliation to GAAP provided on slides 35 and 36.

(2)Cash settlements flow through investing activities for swaps that do not qualify for
hedge accounting.Notional amount of $884 million receives 3 month LIBOR and
pays 5.22% fixed until expiration in March of 2011.

(3)Forward-starting interest rate swaps (designated as cash flow hedges). Cash
settlements will flow through operating activities as part of interest expense.
Notional amounts of $100 million and $100 million receive LIBOR and pay 2.6%
and 2.9% fixed respectively.

3 month

LIBOR

plus

225 bps

3 month

LIBOR

plus

375 bps

Call Schedule

DatePrice

June 15, 2011 105.375

June 15, 2012 103.583

June 15, 2013101.792

June 15, 2014 100.000

and thereafter

Debt to

EBITDA6.3x6.3x5.3x4.3x4.2x (1)

($ Billions)

Year-End2011Goal:3.5x to 4.0x

Exhibit 99.1

27

Exhibit 99.1

28

Exhibit 99.1

29

Adjusted Consolidated EBITDA(1)(Q1 2010 vs. Q1 2009)

(1) Reconciliation to GAAP provided on slides 35 and 36.

In arriving at Adjusted Consolidated EBITDA, the following were excluded from line items:

(2) Restructuring charges associated with closed outpatient satellite clinics of $0.0, $0.0, and $0.3 million, respectively, which reduced occupancy
costs.

(3) Stock-based compensation expense of $3.8, $3.7, and $13.4 million, respectively, which reduced general and administrative expenses.

(4) Impairments related to investments of $0.0, $0.7 and $1.4 million, respectively, which increased other income.

(5) Noncontrolling interests related to discontinued operations of $0.0, $0.3 and $0.6 million, respectively, which reduced noncontrolling interests expense.

Adjusted Consolidated EBITDA increased $8.0 million, or 8.1%, Q1 2010 vs. Q1 2009

(Millions)	Q1 2010	Q1 2009	2009
Net operating revenues	$491.0	$472.9	$ 1,911.1
Operating expenses:
Salaries and benefits	241.9	233.3	948.8
Hospital-related expenses:
Other operating expenses	66.9	66.9	271.4
Supplies	28.3	27.4	112.4
Occupancy costs (2)	11.6	12.0	47.3
Provision for doubtful accounts	6.9	7.8	33.1
	113.7	114.1	464.2
General and administrative expenses (3)	22.5	21.8	91.1
Equity in nonconsolidated affiliates	2.6	2.5	4.6
Other income (4)	0.7	0.5	4.8
Noncontrolling interests (5)	(9.8)	(8.3)	(33.4)
Adjusted Consolidated EBITDA	$106.4	$98.4	$383.0

Exhibit 99.1

30

Payment Sources (Q1 2010 vs. Q1 2009)

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

Exhibit 99.1

31

Operational and Labor Metrics(1)

(1)Numbers have been reclassified to reflect current continuing operations.

(2)Represents discharges from HealthSouth’s 90 consolidated hospitals and 6 LTCHs.

(3)Excludes approximately 400 full-time equivalents, who are considered part of corporate overhead with their salaries and benefits included in
general and administrative expenses in the Company’s consolidated statements of operations. Full-time equivalents included in the above table
represent HealthSouth employees who participate in or support the operations of the Company’s hospitals.

(4)Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-time
equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is determined
by multiplying the number of licensed beds by the Company’s occupancy percentage.

Exhibit 99.1

32

Debt Schedule and Liquidity

(Millions)

(1)Based on trailing four quarter Adjusted Consolidated EBITDA of $391.0 million; reconciliation to GAAP provided on slides 35 and 36.

Exhibit 99.1

33

Non-Operating Cash/Tax Position

Cash Refunds as of Mar. 31, 2010

•Federal tax recoveries virtually complete.

•State tax refunds in progress.

–Approx. $6.5 million received in Q1
2010.

–Approx. $1.1 million net receivable on

the balance sheet.

Future Cash Tax Payments

•Expect to pay about $5-7 million per year of income
tax.

–State income tax.

–Alternative Minimum Tax (AMT).

•The Company does not expect to pay significant
federal income taxes for the next 10-12 years, due
to approximately $905 million in deferred tax assets
as of 12/31/09 outlined in the 2009 Form 10-K. The
majority of the deferred tax assets is related to
NOLs.

–At this time, we do not believe the use

of NOLs will be limited before they

expire, however, no assurances can

be provided.

•HealthSouth is not currently subject to an annual
use limitation (AUL) under the Internal Revenue
Code section 382.

•If we experienced a “change of ownership” as
defined by the Internal Revenue Code section 382,
we would be subject to an AUL, which is equal to
the value of the company at the time of the “change
of ownership” multiplied by the long-term tax exempt
rate.

GAAP Considerations

•HealthSouth’s balance sheet currently
reflects a valuation allowance for the
potential value of NOLs and future
deductions. The valuation allowance is
approximately $893 million.

•GAAP tax rate will net to small amount for
foreseeable future as there will be a
reduction in the valuation allowance when
NOLs are utilized.

Exhibit 99.1

34

Outstanding Share Summary(Millions)

Notes:

(1)Completed an equity offering for 8.8 million shares on June 27, 2008.

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

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

(4)The difference between the basic and diluted shares outstanding is primarily related to our convertible perpetual preferred stock.

Exhibit 99.1

35

Exhibit 99.1

36

Reconciliation Notes

1.Adjusted income from continuing operations and Adjusted Consolidated EBITDA are
non-GAAP financial measures. The Company’s leverage ratio (Total Consolidated Debt
to Adjusted Consolidated EBITDA for the trailing four quarters) is, likewise, a non-GAAP
financial measure. Management and some members of the investment community
utilize adjusted income from continuing operations as a financial measure and Adjusted
Consolidated EBITDA and leverage ratio as liquidity measures on an ongoing basis.
These measures are not recognized in accordance with GAAP and should not be
viewed as an alternative to GAAP measures of performance or liquidity. In evaluating
these adjusted measures, the reader should be aware that in the future HealthSouth
may incur expenses similar to the adjustments set forth above.

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

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

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