8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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): May 10, 2011

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:

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

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

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

o 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 (the “Company”) will participate in the Bank of America Merrill Lynch Health Care Conference in Las Vegas, Nevada on May 10-12, 2011. HealthSouth President and Chief Executive Officer, Jay Grinney, will make a presentation on Wednesday, May 11th, at 8 a.m. PT 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 and financial performance 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 a Current Report on Form 8-K dated April 28, 2011. In the attached slide presentation, the Company has included information related to its current capital structure, growth, and cash reinvestment strategies.

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.

Note Regarding Presentation of Non-GAAP Financial Measures

The financial data contained in the slide presentation attached as Exhibit 99.1 includes non-GAAP financial measures, including the Company’s leverage ratio and Adjusted EBITDA. 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 its leverage 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 standard measurement used by investors to gauge the creditworthiness of an institution. The Company’s credit agreement also includes a maximum leverage ratio financial covenant which allows the Company to deduct up to $75 million of cash on hand from consolidated total debt.

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 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, 2010 (the “2010 Form 10-K”), and Note 3, Long-term Debt, to the condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 (the “March 2011 Form 10-Q”). These covenants are material terms of the credit agreement, and the credit agreement represents a substantial portion of the Company’s liquidity. 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 EBITDA is critical to the Company’s assessment of its liquidity.

In general terms, the credit agreement definition of Adjusted EBITDA, referred to as “Adjusted Consolidated EBITDA” there, allows the Company to add back to consolidated net income interest expense, income taxes, and depreciation and amortization and then add back to or subtract from consolidated net income unusual non-cash or non-recurring items. These items have included, 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 21, Settlements, and Note 22, Contingencies and Other Commitments, to the consolidated financial statements included in the 2010 Form 10-K, and Note 9, Settlements, and Note 10, Contingencies, to the condensed consolidated financial statements included in the March 2011 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 has been allowed to add certain other items to the calculation of Adjusted EBITDA, and there may also be certain other deductions required. This includes net income attributable to noncontrolling interests and interest income associated with income tax recoveries, as discussed in Note 19, Income Taxes, to the consolidated financial statements included in the 2010 Form 10-K. In addition, the Company has been allowed to add non-recurring cash gains, such as the cash proceeds from the UBS Settlement (see Note 21, Settlements, to the consolidated financial statements included in the 2010 Form 10-K) to the calculation of Adjusted EBITDA. As these adjustments may not be indicative of the Company’s ongoing performance, they have been excluded from Adjusted EBITDA presented herein and in the slide presentation attached as Exhibit 99.1.

However, Adjusted 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 EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financing activities. The Company reconciles Adjusted 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 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 in the 2010 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 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. Our 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 condensed consolidated statements of cash flows included in the March 2011 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 free cash flow is included in the slide presentation attached as Exhibit 99.1.

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

	For the Three Months Ended
	March 31,						For the Year Ended December 31,
	2011			2010			2010			2009			2008			2007
	(In Millions)
Net cash provided by operating activities	$	89.1		$	84.8		$	331.0		$	406.1		$	227.2		$	230.6
Provision for doubtful accounts		(5.4	)		(6.9	)		(18.5	)		(33.1	)		(27.0	)		(33.2	)
Professional fees—accounting, tax, and legal		3.8			2.9			17.2			8.8			44.4			51.6
Interest expense and amortization
of debt discounts and fees		35.1			30.5			125.9			125.8			159.5			229.4
UBS Settlement proceeds, gross		-			-			-			(100.0	)		-			-
Equity in net income of nonconsolidated
affiliates		2.5			2.6			10.1			4.6			10.6			10.3
Net income in noncontrolling interests
in continuing operations		(11.7	)		(9.8	)		(40.8	)		(33.4	)		(29.8	)		(31.4	)
Amortization of debt discounts and fees		(1.2	)		(1.7	)		(6.3	)		(6.6	)		(6.5	)		(7.8	)
Distributions from nonconsolidated affiliates		(2.7	)		(2.1	)		(8.1	)		(8.6	)		(10.9	)		(5.3	)
Current portion of income tax (benefit) expense		(2.2	)		2.1			1.9			(7.3	)		(73.8	)		(330.4	)
Change in assets and liabilities		9.9			0.7			5.4			0.8			53.1			8.0
Change in government, class action,
and related settlements		4.3			0.8			2.9			11.2			7.4			171.4
Other operating cash used in (provided by)
discontinued operations		1.4			2.2			4.7			13.5			(11.4	)		10.5
Other		0.5			0.3			2.0			1.2			(1.6	)		14.6
Adjusted EBITDA	$	123.4		$	106.4		$	427.4		$	383.0		$	341.2		$	318.3

For the three months ended March 31, 2011, net cash used in investing activities was $23.4 million and resulted primarily from capital expenditures, net settlement payments related to interest rate swaps, and purchases of restricted investments offset by a decrease in restricted cash. Net cash provided by financing activities during the three months ended March 31, 2011 was $26.9 million and resulted primarily from the proceeds from the Company’s March 2011 bond offering offset by net payments on the Company’s revolving credit facility, distributions paid to noncontrolling interests of consolidated affiliates, and dividends paid on the Company’s convertible perpetual preferred stock.

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 year ended December 31, 2010, net cash used in investing activities was $125.9 million and resulted primarily from capital expenditures, net settlement payments related to interest rate swaps, acquisitions of businesses, and net purchases of restricted investments offset by a decrease in restricted cash and proceeds from the sale of the Company’s hospital in Baton Rouge. Net cash used in financing activities during the year ended December 31, 2010 was $237.7 million and resulted primarily from net debt payments, 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, 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, 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 our 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.

For the year ended December 31, 2007, net cash provided by investing activities was $1,184.5 million and resulted primarily from the proceeds from the divestitures of the Company’s surgery centers, outpatient, and diagnostic divisions. Net cash used in financing activities during the year ended December 31, 2007 was $1,436.6 million and resulted primarily from net debt payments primarily using the net proceeds from the divestitures discussed above.

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 or plans 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.

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking information in 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 2010 Form 10-K, the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, and in 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 its May 11, 2011 presentation at the Bank of America Merrill Lynch Health Care Conference in Las Vegas, Nevada.

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: May 10, 2011

EX-99.1

Bank of America Merrill Lynch 2011 Healthcare
Conference
Las Vegas, NV| May 10-12, 2011

Jay Grinney, President and Chief Executive Officer

Exhibit 99.1

The information contained in this presentation includes certain estimates, projections and other forward-
looking information that reflect our current views with respect to future events, strategy, capital
expenditures 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 events or results, and those
differences may be material.

There can be no assurance that any estimates, projections or forward-looking information will be realized.

All such estimates, projections and forward-looking information speak only as of the date hereof.
HealthSouth undertakes no duty to publicly update or revise the information contained herein.

You are cautioned not to place undue reliance on the estimates, projections and other forward-looking
information in this presentation as they are based on current expectations and general assumptions and
are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the
year ended December 31, 2010, our Form10-Q for quarter ended March 31, 2011, and in other documents
we previously filed with the SEC, many of which are beyond our control, that may cause actual 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. Schedules are attached that reconcile the non-GAAP financial
measures included in the following presentation to the most directly comparable financial measures
calculated and presented in accordance with Generally Accepted Accounting Principles in the United
States. Our Form 8-K, dated May 10, 2011, to which the following supplemental slides are attached as
Exhibit 99.1, provides further explanation and disclosure regarding our use of non-GAAP financial measures
and should be read in conjunction with these supplemental slides.

Forward-Looking Statements

2

Exhibit 99.1

Inpatient Rehabilitation Hospitals (“IRF”)

Outpatient Rehabilitation Satellite Clinics

Long-Term Acute Care Hospitals (“LTCH”)

Hospital-Based Home Health Agencies

Employees

Revenue in 2010

Inpatient Discharges in 2010

Outpatient Visits in 2010

Number of States

Exchange (Symbol)

3

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

Our Company

Marketshare

~ 8% of IRFs
~ 17% of Licensed Beds
~ 22% of Patients Served

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

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

Exhibit 99.1

Our Hospitals

Major Services

•Rehabilitation Physicians:manage and treat medical needs of patients

•RehabilitationNurses:oversee treatment programs of patients

•Physical Therapists:address physical function, mobility, safety

•Occupational Therapists:promote independence and re-integration

•Speech-Language Therapists:treat communication & swallowing disorders

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

•Post-discharge services:outpatient therapy and home health

4

Exhibit 99.1

Our Patients

5

Most Common Conditions (Q1 2011)

1.Stroke17.3%

2.Neurological16.4%

3.Debility11.4%

4.Fractureofthelowerextremity11.2%

5.Knee/Hipreplacement8.3%

6.Otherorthopedicconditions9.4%

7.Braininjury7.3%

8.Cardiacconditions4.4%

9.Spinalcordinjury3.3%

10.Allother11.0%

Referral Sources

94% Acute Care Hospitals

5% PhysicianOffices

1% SkilledNursingFacilities

Admission to an IRF

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

•All IRF patients must meet
reasonable and necessary criteria
and must be admitted by a
physician.

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

•IRF patients receive 24-hour, 7
days a week nursing care.

•Average length of stay (ALOS) =
~14 days

Exhibit 99.1

Our Payors (Q1 2011)

Prospective Payment System (“PPS”)

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

–Diagnosis of patient’s illness

•Fixed payment per CMG adjusted for:

–Acuity/severity

–Regional wage differential

•Per diems for “short stays”

Per Diem or CMG

•Negotiated rate

•Some are “tiered” for acuity/severity

Variety of methodologies

Varies by state

Variety of methodologies

Medicare

Managed Care

•Includes managed
Medicare

Other Third-Party Payors

Medicaid

Workers’ Comp./
Patients/Other

Payment Methodology

Payor Source

6

71.2%

20.0%

2.3%

4.8%

1.7%

Exhibit 99.1

Our Quality

FIM Gain

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

7

(1) Average = Expected, Risk-adjusted

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

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

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

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

Exhibit 99.1

(1) The 1,171 total and the 91 for HLS do not include HealthSouth Rehabilitation Hospital of Northern Virginia; Rehabilitation Hospital of Southwest Virginia;
Rehabilitation Hospital of Mesa, AZ; and Rehabilitation Hospital of Fredericksburg, VA. that were opened after the data collection. Desert Canyon
Rehabilitation Hospital and HealthSouth Sugar Land Rehabilitation Hospital, currently owned by HLS, were included in the 139 non-HLS freestanding.

(2) In 2009, HealthSouth averaged 1,177 total Medicare and non-Medicare discharges in its 90 consolidated hospitals and 6 long-term acute care hospitals.

    Sources:FY 2011 CMS Rate Setting File - see slide 27

8

Total Inpatient Rehabilitation Facilities (IRFs): 1,171(1)

Our Cost-Effectiveness

HealthSouth
differentiates
itself by
providing
superior quality
care at a

lower cost.

Exhibit 99.1

Our Track Record

($ in millions)

(1) Reconciliation to GAAP provided on slides 28-33 and 37.

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

9

Exhibit 99.1

Our Track Record

10

Leverage Ratio(1)

(billions)

(1)Reconciliation to GAAP provided on slides 28-33, 36, and 37.

Interest Expense

$229

$131

Exhibit 99.1

Q1 2011 Highlights (Q1 2011 vs. Q1 2010)

üRevenue growth of 9.6%

―Inpatient revenue growth of 9.2% driven by volume and price

§Discharge growth 7.1%; same-store discharge growth 4.5%

•Against soft volume growth in Q1 2010

•Continued positive contribution from hospitals opened or acquired in the last
12 months

üAdjusted EBITDA(1) grew 16.0%.

―Revenue growth driven by volume and pricing, disciplined expense
management, lower general and administrative expense, and lower bad
debt expense

―Net benefit related to state provider taxes of net $1.1 million

üStrong adjusted free cash flow generation (2)

―Higher Adjusted EBITDA

―Offset by anticipated increase in working capital, interest expense, and
maintenance capital expenditures

―The final swap payment of $10.9 million was made in March 2011.

11

(1)Reconciliation to GAAP provided on slides 28, 29, 33, and 37.

(2)Reconciliation to GAAP provided on slide 36.

Exhibit 99.1

2011 Guidance - Adjusted EBITDA

Adjusted EBITDA (1)

$440 million to $450 million

(1) Reconciliation to GAAP provided on slides 28, 29, 33, and 37.

Considerations:

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

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

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

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

12

Exhibit 99.1

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

$1.28 to $1.33 (5)

Considerations:

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

üGuidance does not include any
repayment/refinancing of the 10.75% senior notes
callable in June 2011, which would affect the
following items:

•Interest expense will be approximately $10
million higher in the first half of 2011 vs. prior
period in 2010.

•Does not include “loss on early extinguishment of
debt” (non-cash)

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

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

(1)Adjusted income from continuing operations. This non-GAAP measure was part of our historical guidance. A reconciliation of adjusted income from
continuing operations to the corresponding GAAP measure can be found on slides 34 and 35.

(2)Income from continuing operations attributable to HealthSouth

(3)Current period amounts in income tax provision; see slides 34 and 35

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

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

13

Exhibit 99.1

Business Outlook: 2011 to 2013

Business Model

•Adjusted EBITDA CAGR: 5-8% (1)

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

Strategy

2010

2011

2012

2013

Deleveraging
(2)

Achieved 3.5x
debt to EBITDA

Longer-Term Goal: ~ 3.0x debt to EBITDA

Growth

Organic growth (includes capacity expansions)

De novos(~4-6/year)

IRF acquisitions (~ 2-3/year)

Opportunistic, disciplined acquisitions
of complementary post-acute services

Key Operational
Initiatives

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

•TeamWorks = Care Management

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

(1)Reconciliation to GAAP provided on slides 28 - 33, 36, and 37.

(2)Exclusive of any E&Y recovery.

14

De novos(~2-3/year)

Increased
De novo growth
to ~4-6/year

Exhibit 99.1

Business Outlook: Revenue Assumptions

Revenue

Volume

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

•Includes bed expansions, de novos
and unit consolidations

Medicare

Managed
Care

Other

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

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

15

Exhibit 99.1

Business Outlook: Expense Assumptions

Expense

Salaries & Benefits (1)

Hospital Expenses

•Other operating and supplies
tracking with inflation

4.5% of revenue

(excludes stock-based compensation)

Salaries

& Benefits

Hospital
Expenses

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

16

Exhibit 99.1

Business Outlook: Adjusted Free Cash Flow (1)

(1) Reconciliation to GAAP provided on slide 36.

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

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

+Interest expense will be reduced by ~$12 million in the second half of 2011 as a result of a
plan to call $285 million of the 10.75% senior notes callable in June 2011.

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

–Interest expense will be approximately $10 million higher in the first half of 2011 versus
prior period,preceding the repayment/refinancing of $285 million of the 10.75% senior
notes.

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

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

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

•Loss on early extinguishment of debt

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

17

Exhibit 99.1

Free Cash Flow Reinvestment

18

•$500 million of 10.75% notes callable June 2011

•Growth in core business

•Bed expansions

•De novo hospitals

•Hospital acquisitions

•Acute care IRF unit acquisition/consolidation

•Purchase properties under operating leases

•Lower capital cost

•Greater control of property, CON and/or license

•Share repurchase

•Offset shares underlying convertible preferred shares

•Offset shares issued in settlement of securities litigation

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

•Acquisitions of complementary businesses

Exhibit 99.1

(1)Does not include $387.4 million of convertible perpetual preferred stock and ~$123 million of capital leases and other note payables.

Initial Call of the 10.75% Senior Notes

19

Call schedule:

June 15, 2011 (price 105.375);

June 15, 2012 (price 103.583);

June 15, 2013 (price 101.792);

June 15, 2014 and thereafter
(price 100.000)

As of March 31, 2011

$49 LC

$500

Revolver

L+350

§Plan to call $285 million in principal on June 15, 2011

§Cash use of approx. $300 million ($223 million revolver and $77 million cash)

•Interest savings for second half of 2011 will be ~$12 million

•Loss on early extinguishment of debt is expected to be ~$23 million.

Debt Maturity Profile (1)

Exhibit 99.1

Accelerated IRF De Novo Strategy

•Targeting to at least double the number of de novos per year

–Highest and best use of cash and available capital

–Reflects success of recent de novo activity

–High returns and relatively low risk

–Incremental capital of approx. $20 million per IRF

•Driven by availability of capital and refined market analysis

–Proprietary screening tool remains at the core of market selection

–Market analysis refined based on recent de novo history and analysis of
legacy HealthSouth IRF’s

•Cautious approach toward diversifying into other post-acute services

–ACO direction unclear

–Regulatory uncertainty remains

20

Exhibit 99.1

(1)Reconciliation to GAAP provided on slides 28 - 33, 36, and 37.

The HealthSouth Value Proposition

Poised for Growth

Financial Strength/Strong
Cash Flow Generation

Industry Leading Position

Attractive Healthcare Sector

21

Exhibit 99.1

Appendix

22

Exhibit 99.1

Business Outlook: Income Tax Considerations

GAAP Considerations:

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

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

• Expect effective tax rate of ~40% going forward

Future Cash Tax Payments:

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

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

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

23

Exhibit 99.1

(1)Based on 2008 and trailing 4 quarter Adjusted EBITDA of $341.2 million and $444.4 million, respectively; reconciliation to GAAP provided
on slides 28 - 31, 33, and 37.

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

Debt, Liquidity, and Swaps

Swaps (2)

The final cash settlement on our net $884 million swaps
for $10.9 million was made in Q1 2011.

Liquidity

24

Exhibit 99.1

Debt Schedule

(1)Based on 4 quarter trailing and 2010 Adjusted EBITDA of $444.4 million and $427.4 million, respectively; reconciliation to GAAP provided
on slides 28, 29, 33, and 37.

25

Exhibit 99.1

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

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

•HealthSouth’s
volume growth has
outpaced
competitors’.

•TeamWorks =
standardized and
enhanced sales &
marketing

•Bed additions will
help facilitate
continued organic
growth.

10.7%

9.4%

5.6%

2.6%

4.6%

5.5%

5.8%

5.8%

5.3%

2.5%

2.2%

1.1%

26

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

200720082009Q109Q209Q309Q409Q110

Exhibit 99.1

CMS Fiscal Year 2011 IRF Rate Setting File Analysis

Notes:

(1) All data provided was filtered and compiled from the Centers for Medicare and
Medicaid Services (CMS) Fiscal Year 2011 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 1,171 inpatient rehabilitation facilities
used to estimate the policy updates for the FY 2011 IRF-PPS Final Rule. Most of the
data represents historical information from the CMS fiscal year 2009 period and
does not reflect the same HealthSouth hospitals in operation today. The data
presented was separated into three categories: Freestanding, Units, and
HealthSouth. HealthSouth is a subset of Freestanding and the Total.

27

Exhibit 99.1

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

(1) (2) (3) - Notes on page 33.

28

Exhibit 99.1

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

(1) (2) (3) - Notes on page 33.

29

Exhibit 99.1

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

(1) (2) (3) - Notes on page 33.

30

Exhibit 99.1

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

(1) (2) (3) - Notes on page 33.

31

Exhibit 99.1

32

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

(1) (2) (3)- Notes on page 33.

Exhibit 99.1

Reconciliation Notes for Slides 28-32

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

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

3.Adjusted EBITDA is a component of our guidance.

33

Exhibit 99.1

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

(1) (2) (3) (4) - Notes on page 35.

34

Exhibit 99.1

Reconciliation Notes for Slide 34

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

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

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

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

35

Exhibit 99.1

Adjusted Free Cash Flow

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

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

36

Exhibit 99.1

Net Cash Provided by Operating Activities

37

Exhibit 99.1