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): July 28, 2016

HealthSouth Corporation

(Exact name of Registrant as specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

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

3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243

(Address of Principal Executive Offices, Including Zip Code)

(205) 967-7116

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

ITEM 2.02. Results of Operations and Financial Condition.

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

HealthSouth Corporation (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 and 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.

On July 28, 2016, the Company issued a press release reporting the financial results of the Company for the three and six months ended June 30, 2016. A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.

ITEM 7.01. Regulation FD Disclosure.

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

In addition, a copy of the supplemental information which will be discussed during the Company’s earnings call at 9:00 a.m. Eastern Time on Friday,July 29, 2016 is attached to this report as Exhibit 99.2 and incorporated herein by reference. This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act 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 press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow.

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

The leverage ratio referenced therein is defined as the ratio of consolidated total debt to Adjusted EBITDA for the trailing four quarters. The Company believes 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 reconciles Adjusted EBITDA to net income in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2 and to net cash provided by operating activities in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. Adjusted EBITDA for the Company’s reportable segments is reconciled to

net income from continuing operations before income tax expense in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.

The Company uses Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important 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 Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” and 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, 2015 (the “2015 Form 10‑K”). These covenants are material terms of the credit agreement. Noncompliance with these financial covenants under the credit agreement—its interest coverage ratio and its 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 be on terms less 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, paying common stock dividends, 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, therein referred to as “Adjusted Consolidated EBITDA,” allows the Company to add back to consolidated net income interest expense, income taxes, and depreciation and amortization and then add back to consolidated net income (1) all unusual or nonrecurring items reducing consolidated net income (of which only up to $10 million in a year may be cash expenditures), (2) any losses from discontinued operations and closed locations, (3) costs and expenses, including legal fees and expert witness fees, incurred with respect to litigation associated with stockholder derivative litigation, and (4) share-based compensation expense. The Company also subtracts from consolidated net income all unusual or nonrecurring items to the extent they increase consolidated net income.

Under the credit agreement, the Adjusted EBITDA calculation does not include net income attributable to noncontrolling interests and includes (1) gain or loss on disposal of assets, (2) professional fees unrelated to the stockholder derivative litigation, and (3) unusual or nonrecurring cash expenditures in excess of $10 million, and (4) pro forma adjustments resulting from debt transactions and development activities. Items falling within the credit agreement’s “unusual or nonrecurring” classification may occur in future periods, but these items and amounts recognized can vary significantly from period to period and may not directly relate to the Company’s ongoing operations. Accordingly, these items may not be indicative of the Company’s ongoing performance, so the Adjusted EBITDA calculation presented here includes adjustments for them.

Adjusted EBITDA is not a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in 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. 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 Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2015 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, pursue development activities, and return capital to its common stockholders. The calculation of adjusted free cash flow and a reconciliation of net cash provided by operating activities to adjusted free cash flow are included in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not 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 condensed consolidated statements of cash flows included in the June 2016 Form 10-Q, when filed, and in the press release attached as Exhibit 99.1 for the GAAP measures of cash flows from operating, investing, and financing activities.

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

items related to corporate and facility restructurings, and certain other items the Company believes to be non-indicative of its ongoing operations. These items are uncertain and will depend on several factors, including industry and market conditions, and could be material to the Company's results computed in accordance with GAAP.

Forward-Looking Statements

The information contained in the press release and supplemental information includes certain estimates, projections, and other forward-looking statements that involve known and unknown risks and relate to, among other things, future events, the Company’s business strategy, financial plans, dividend strategies or payments, effective income tax rates, plans to repurchase its debt or equity securities, future financial performance, projected business results or model, ability to return value to its shareholders, projected capital expenditures, leverage ratio, acquisition opportunities, and the impact of future legislation or regulation. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These estimates, projections, and other forward-looking statements are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.

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

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

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking statements in this report, the press release, and supplemental information 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 attached press release and in the 2015 Form 10-K, the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2016, when filed, 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.

Exhibit Number	Description
99.1	Press release of HealthSouth Corporation, dated July 28, 2016.
99.2	Supplemental information provided in connection with the second quarter 2016 earnings call of HealthSouth Corporation.

SIGNATURES

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

HEALTHSOUTH CORPORATION

By:	/S/   DOUGLAS E. COLTHARP
	Name:	Douglas E. Coltharp
	Title:	Executive Vice President and Chief Financial Officer

Dated: July 28, 2016

EX-99.1

Exhibit 99.1

Media Contact	July 28, 2016
Casey Lassiter, 205-641-1118	For Immediate Release
casey.lassiter@healthsouth.com
Investor Relations Contact
Crissy Carlisle, 205-970-5860
crissy.carlisle@healthsouth.com

HealthSouth Reports Strong Revenue, Volume, and Earnings Growth

for Second Quarter 2016 and Raises Full-Year 2016 Guidance

BIRMINGHAM, Ala. - HealthSouth Corporation (NYSE: HLS), one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-based post-acute services, today reported its results of operations for the second quarter ended June 30, 2016.

“The second quarter was another strong quarter for HealthSouth with volume, revenue, and earnings from our recent acquisitions complementing solid organic growth,” said Jay Grinney, President and Chief Executive Officer of HealthSouth. “The quarter also was successful from a development standpoint with the announcement of four, new hospital projects, two of which will be in states where we currently do not have a hospital (North Carolina and Oklahoma) and two in existing states (Alabama and Missouri). With these newly announced projects, we have 11 inpatient rehabilitation facilities that are scheduled to come on-line over the next two to three years and contribute to future growth. Our home health partner, Encompass Home Health and Hospice, also added to its portfolio in the quarter with the acquisition of two home health agencies and two hospice agencies, as well as the opening of one de novo home health agency.”

Consolidated Results

					Growth
	Q2 2016		Q2 2015		Dollars		Percent
	(In Millions, Except per Share Data)
Net operating revenues	$	920.7	$	764.4	$	156.3	20.4	%
Income from continuing operations attributable to HealthSouth per diluted share	0.65		0.47		0.18		38.3	%
Adjusted earnings per share	0.69		0.59		0.10		16.9	%
Cash flows provided by operating activities	152.2		102.9		49.3		47.9	%
Adjusted EBITDA	204.3		169.5		34.8		20.5	%
Adjusted free cash flow	115.3		94.5		20.8		22.0	%
	Six Months Ended June 30,
	2016		2015
Cash flows provided by operating activities	311.9		204.9		107.0		52.2	%
Adjusted free cash flow	244.8		173.9		70.9		40.8	%

Revenue growth primarily resulted from strong volumes in both of the Company's operating segments and included the effect of the Company's acquisitions of Reliant Hospital Partners, LLC and affiliated entities (“Reliant”) on October 1, 2015 and CareSouth Health System, Inc. (“CareSouth”) on November 2, 2015. Revenue growth was the primary driver of the 20.5% increase in Adjusted EBITDA.

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Exhibit 99.1

The increase in adjusted earnings per share primarily resulted from increased Adjusted EBITDA. Adjusted earnings per share also included the impact of higher interest expense related to the financing of the Reliant and CareSouth acquisitions, higher depreciation and amortization related to acquisitions and capital investments, and a lower share count resulting from share repurchases.

Adjusted free cash flow also increased primarily as a result of the Company's growth in Adjusted EBITDA. Adjusted free cash flow in the first half of 2016 included increased cash interest expense related to the acquisitions of Reliant and CareSouth and lower working capital primarily attributable to payroll-related liabilities.

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

Inpatient Rehabilitation Segment Results

					Growth
	Q2 2016		Q2 2015		Dollars		Percent
Net operating revenues:	(In Millions)
Inpatient	$	721.2	$	618.7	$	102.5	16.6	%
Outpatient and other	31.4		26.6		4.8		18.0	%
Total segment revenue	$	752.6	$	645.3	$	107.3	16.6	%
	(Actual Amounts)
Discharges	41,365		36,408		4,957		13.6	%
Same-store discharge growth							1.9	%
Net patient revenue per discharge	$	17,435	$	16,994	$	441	2.6	%
	(In Millions)
Adjusted EBITDA	$	204.1	$	170.5	$	33.6	19.7	%

• Revenue - Revenue growth resulted primarily from same-store and new-store volume growth. Discharge growth from new stores resulted from the Company's acquisitions of Reliant (October 2015) and Cardinal Hill Rehabilitation Hospital (May 2015), the Company's joint venture with CHI St. Vincent in Hot Springs, Arkansas (February 2016), and the de novo opened in Franklin, Tennessee (December 2015).

Growth in net patient revenue per discharge benefited by approximately 90 basis points from an approximate $5 million Supplemental Security Income (“SSI”) adjustment that negatively impacted revenue in the second quarter of 2015.

The increase in outpatient and other revenues primarily was due to the acquisition of Reliant.

• Adjusted EBITDA - Inpatient rehabilitation segment Adjusted EBITDA increased by 19.7% driven primarily by revenue growth. All operating expenses as a percent of net operating revenues were impacted in the second quarter of 2015 by the aforementioned SSI adjustment. Salaries and benefits in the second quarter of 2016 included the positive impact of $2.4 million in rebates associated with a contractual periodic pharmacy benefit reconciliation for 2014 and 2015. Hospital operating expenses (other operating expenses, supplies, and occupancy costs) as a percent of net operating revenues improved in the second quarter of 2016 compared to the second quarter of 2015 primarily due to continued supply chain initiatives. This improvement in hospital operating expenses occurred in spite of an increase in occupancy costs as a percent of net operating revenues due to the acquisition of Reliant. Bad debt expense as a percent of net operating revenues increased from 1.6% in the second quarter of 2015 to 1.9% in the second quarter of 2016 due to administrative payment delays at the Company's largest Medicare Administrative Contractor.

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Home Health and Hospice Segment Results

					Growth
	Q2 2016		Q2 2015		Dollars			Percent
Net operating revenues:	(In Millions)
Home health	$	157.1	$	111.5	$	45.6		40.9	%
Hospice and other	11.0		7.6		3.4			44.7	%
Total segment revenue	$	168.1	$	119.1	$	49.0		41.1	%
	(Actual Amounts)
Admissions	25,753		16,862		8,891			52.7	%
Same-store admissions growth								11.1	%
Episodes	45,774		31,817		13,957			43.9	%
New-store episode growth								31.5	%
Same-store episode growth								12.4	%
Revenue per episode	$	3,033	$	3,082	$	(49	)	(1.6	)%
	(In Millions)
Adjusted EBITDA	$	26.0	$	19.0	$	7.0		36.8	%

• Revenue - Revenue growth resulted from strong same-store and new-store volume growth. Growth from new stores resulted from the acquisition of CareSouth and Encompass' other acquisitions throughout 2015.

Revenue per episode was impacted by the Medicare home health reimbursement rate cuts that became effective January 1, 2016, a higher percentage of patients requiring therapy visits, and lower revenue per episode at CareSouth due to patient mix.

• Adjusted EBITDA - Growth in Adjusted EBITDA resulted primarily from revenue growth. Adjusted EBITDA for the segment was impacted by lower average revenue per episode, higher cost per visit driven by an increased percentage of therapy patients, merit and benefit costs increases, and expenses related to the integration of CareSouth.

Capital Structure Transactions

Repurchases of Common Stock

During the second quarter of 2016, the Company repurchased 287,672 shares of its common stock for approximately$11 million in the open market. During the first half of 2016, the Company has repurchased 602,204 shares of its common stock for approximately $22 million. As of June 30, 2016, the Company had a remaining repurchase authorization of approximately $137 million.

Redemption of Senior Notes

In May 2016, the Company redeemed $50 million of the outstanding principal amount of its7.75% Senior Notes due 2022 (the “2022 Notes”). Pursuant to the terms of the 2022 Notes, this optional redemption was made at a price of 103.875%, which resulted in a total cash outlay of approximately $52 million. This redemption was funded using cash on hand and capacity under the Company's revolving credit facility. As a result of this redemption, the Company recorded a $2.4 million loss on early extinguishment of debt in the second quarter of 2016.

In July 2016, the Company issued notice for redemption of the remaining outstanding principal balance of $76 million of the 2022 Notes. This optional redemption will be made at a price of 102.583%. The Company plans to use cash on hand and capacity under its revolving credit facility to fund the redemption, which will close in September 2016. As a result of this redemption, the Company expects to record an approximate $3 million loss on early extinguishment of debt in the third quarter of 2016.

3

Dividend Increase

On July 21, 2016, the Company's board of directors approved an increase in the Company's quarterly dividend of $0.01 per share, or 4.3%, and declared a quarterly cash dividend on its common stock of $0.24 per share. The dividend will be payable on October 17, 2016 to holders of record on October 3, 2016.

“The strength and consistency of our free cash flow generation was again evident in the first half of 2016,” said Doug Coltharp, Executive Vice President and Chief Financial Officer of HealthSouth. “Consistent with our established priorities, we used this cash flow to support year-to-date discretionary capital expenditures of approximately $57 million, an approximately $85 million reduction in funded debt (which together with our Adjusted EBITDA growth resulted in a decline in our leverage ratio to 4.1x), the repurchase of approximately $22 million of common stock, and the payment of approximately $42 million in cash dividends on our common stock.”

2016 Guidance

Based on its results for the first half of 2016 and its current expectations for the remainder of 2016, the Company is increasing its full-year guidance ranges.

	Full-Year 2016 Guidance Ranges
	Previous Guidance	Revised Guidance
	(In Millions, Except Per Share Data)
Net operating revenues	$3,580 to $3,680	$3,600 to $3,700
Adjusted EBITDA	$770 to $790	$775 to $795
Adjusted earnings per share from continuing operations attributable to HealthSouth	$2.37 to $2.49	$2.44 to $2.56

For additional considerations regarding the Company's 2016 guidance ranges, see the supplemental information posted on the Company's website at http://investor.healthsouth.com and the Other Information section below.

Earnings Conference Call and Webcast

The Company will host an investor conference call at 9:00 a.m. Eastern Time on Friday,July 29, 2016 to discuss its results for the second quarter of 2016. For reference during the call, the Company will post certain supplemental information at

http://investor.healthsouth.com.

The conference call may be accessed by dialing 877 587-6761 and giving the pass code 38862905. International callers should dial 706 679-1635 and give the same pass code. Please call approximately ten minutes before the start of the call to ensure you are connected.The conference call will also be webcast live and will be available at http://investor.healthsouth.com by clicking on an available link.

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

About HealthSouth

HealthSouth is one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-based post-acute services in 34 states and Puerto Rico through its network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies. HealthSouth can be found on the Web at www.healthsouth.com.

Other Information

The information in this press release is summarized and should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 (the “June 2016 Form 10-Q”), when filed, as well as the Company's Current Report on Form 8-K filed on July 28, 2016 (the “Q2 Earnings Form 8-K”), to which this press release is attached as Exhibit 99.1. In addition, the Company will post supplemental information today on its website at http:// investor.healthsouth.com for reference during its July 29, 2016 earnings call.

The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are included below or in

4

the Q2 Earnings Form 8-K. Readers are encouraged to review the “Note Regarding Presentation of Non-GAAP Financial Measures” included in the Q2 Earnings Form 8-K which provides further explanation and disclosure regarding the Company’s use of these non-GAAP financial measures.

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

The Q2 Earnings Form 8-K and, when filed, the June 2016 Form 10-Q can be found on the Company's website at

http://investor.healthsouth.com and the SEC's website at www.sec.gov.

5

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(In Millions)
Net operating revenues	$	920.7		$	764.4		$	1,830.5		$	1,505.0
Less: Provision for doubtful accounts	(15.4		)	(10.9		)	(31.9		)	(22.5		)
Net operating revenues less provision for doubtful accounts	905.3			753.5			1,798.6			1,482.5
Operating expenses:
Salaries and benefits	486.1			401.8			972.2			786.9
Other operating expenses	121.5			104.2			240.7			207.4
Occupancy costs	17.9			12.5			35.9			24.6
Supplies	34.4			31.7			69.4			63.1
General and administrative expenses	34.4			32.1			66.3			66.7
Depreciation and amortization	42.9			32.7			85.3			64.6
Government, class action, and related settlements	—			—			—			8.0
Professional fees—accounting, tax, and legal	1.7			0.1			1.9			2.3
Total operating expenses	738.9			615.1			1,471.7			1,223.6
Loss on early extinguishment of debt	2.4			18.8			4.8			20.0
Interest expense and amortization of debt discounts and fees	43.4			30.9			88.0			62.7
Other income	(0.7		)	(3.0		)	(1.3		)	(3.5		)
Equity in net income of nonconsolidated affiliates	(2.4		)	(2.3		)	(4.8		)	(3.9		)
Income from continuing operations before income tax expense	123.7			94.0			240.2			183.6
Provision for income tax expense	42.4			32.2			82.1			62.5
Income from continuing operations	81.3			61.8			158.1			121.1
Loss from discontinued operations, net of tax	(0.1		)	(1.6		)	(0.2		)	(1.9		)
Net income	81.2			60.2			157.9			119.2
Less: Net income attributable to noncontrolling interests	(18.6		)	(17.3		)	(37.3		)	(33.8		)
Net income attributable to HealthSouth	62.6			42.9			120.6			85.4
Less: Convertible perpetual preferred stock dividends	—			—			—			(1.6		)
Net income attributable to HealthSouth common shareholders	$	62.6		$	42.9		$	120.6		$	83.8

(Continued) 6

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Operations (Continued)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(In Millions, Except Per Share Data)
Weighted average common shares outstanding:
Basic	89.3			89.8			89.4			88.4
Diluted	99.4			101.5			99.4			101.3
Earnings per common share:
Basic earnings per share attributable to HealthSouth common shareholders:
Continuing operations	$	0.70		$	0.49		$	1.34		$	0.96
Discontinued operations	—			(0.02		)	—			(0.02		)
Net income	$	0.70		$	0.47		$	1.34		$	0.94
Diluted earnings per share attributable to HealthSouth common shareholders:
Continuing operations	$	0.65		$	0.47		$	1.26		$	0.91
Discontinued operations	—			(0.02		)	—			(0.02		)
Net income	$	0.65		$	0.45		$	1.26		$	0.89
Cash dividends per common share	$	0.23		$	0.21		$	0.46		$	0.42
Amounts attributable to HealthSouth common shareholders:
Income from continuing operations	$	62.7		$	44.5		$	120.8		$	87.3
Loss from discontinued operations, net of tax	(0.1		)	(1.6		)	(0.2		)	(1.9		)
Net income attributable to HealthSouth	$	62.6		$	42.9		$	120.6		$	85.4

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HealthSouth Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30, 2016		December 31, 2015
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	70.3	$	61.6
Accounts receivable, net of allowance for doubtful accounts of $48.9 in 2016; $39.3 in 2015	420.6		410.5
Other current assets	168.6		126.6
Total current assets	659.5		598.7
Property and equipment, net	1,336.9		1,310.1
Goodwill	1,899.7		1,890.1
Intangible assets, net	414.2		419.4
Deferred income tax assets	115.5		190.8
Other long-term assets	206.8		197.0
Total assets	$	4,632.6	$	4,606.1
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	36.5	$	36.8
Accounts payable	67.1		61.6
Accrued expenses and other current liabilities	355.5		328.0
Total current liabilities	459.1		426.4
Long-term debt, net of current portion	3,050.0		3,134.7
Other long-term liabilities	154.1		144.6
	3,663.2		3,705.7
Commitments and contingencies
Redeemable noncontrolling interests	120.0		121.1
Shareholders’ equity:
HealthSouth shareholders’ equity	672.7		611.4
Noncontrolling interests	176.7		167.9
Total shareholders’ equity	849.4		779.3
Total liabilities and shareholders’ equity	$	4,632.6	$	4,606.1

8

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2016			2015
	(In Millions)
Cash flows from operating activities:
Net income	$	157.9		$	119.2
Loss from discontinued operations, net of tax	0.2			1.9
Adjustments to reconcile net income to net cash provided by operating activities—
Provision for doubtful accounts	31.9			22.5
Depreciation and amortization	85.3			64.6
Loss on early extinguishment of debt	4.8			20.0
Equity in net income of nonconsolidated affiliates	(4.8		)	(3.9		)
Distributions from nonconsolidated affiliates	3.0			3.7
Stock-based compensation	13.1			15.6
Deferred tax expense	73.2			55.6
Other	6.9			11.0
Change in assets and liabilities—
Accounts receivable	(59.5		)	(62.1		)
Other assets	(4.3		)	(6.5		)
Accounts payable	1.2			1.7
Accrued payroll	9.3			(23.6		)
Other liabilities	(1.9		)	(10.7		)
Premium received on bond issuance	—			8.0
Premium paid on redemption of bonds	(3.9		)	(11.8		)
Net cash used in operating activities of discontinued operations	(0.5		)	(0.3		)
Total adjustments	153.8			83.8
Net cash provided by operating activities	311.9			204.9

(Continued) 9

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	Six Months Ended June 30,
	2016			2015
	(In Millions)
Cash flows from investing activities:
Purchases of property and equipment	(71.4		)	(46.3		)
Capitalized software costs	(15.2		)	(15.2		)
Acquisitions of businesses, net of cash acquired	(9.4		)	(77.7		)
Net change in restricted cash	(11.5		)	13.1
Other	2.0			(0.6		)
Net cash used in investing activities	(105.5		)	(126.7		)
Cash flows from financing activities:
Proceeds from bond issuance	—			700.0
Principal payments on debt, including pre-payments	(112.8		)	(546.1		)
Borrowings on revolving credit facility	165.0			270.0
Payments on revolving credit facility	(145.0		)	(442.0		)
Debt amendment and issuance costs	—			(13.9		)
Repurchases of common stock, including fees and expenses	(24.1		)	—
Dividends paid on common stock	(41.9		)	(37.1		)
Dividends paid on convertible perpetual preferred stock	—			(3.1		)
Distributions paid to noncontrolling interests of consolidated affiliates	(33.6		)	(26.2		)
Other	(5.3		)	(1.0		)
Net cash used in financing activities	(197.7		)	(99.4		)
Increase (decrease) in cash and cash equivalents	8.7			(21.2		)
Cash and cash equivalents at beginning of period	61.6			66.7
Cash and cash equivalents at end of period	$	70.3		$	45.5
Supplemental schedule of noncash financing activity:
Conversion of preferred stock to common stock	$	—		$	93.2

10

HealthSouth Corporation and Subsidiaries

Supplemental Information

Earnings Per Share

	QTD						YTD
	Q2 2016			Q2 2015			Q2 2016			Q2 2015
	(In Millions, Except Per Share Data)
Adjusted EBITDA	$	204.3		$	169.5		$	396.4		$	325.6
Interest expense and amortization of debt discounts and fees	(43.4		)	(30.9		)	(88.0		)	(62.7		)
Depreciation and amortization	(42.9		)	(32.7		)	(85.3		)	(64.6		)
Stock-based compensation expense	(8.6		)	(6.2		)	(13.1		)	(15.6		)
Noncash loss on disposal or impairment of assets	(0.2		)	(0.8		)	(0.4		)	0.7
	109.2			98.9			209.6			183.4
Certain expenses non-indicative of ongoing operations:
Government, class action, and related settlements	—			—			—			(8.0		)
Professional fees—accounting, tax, and legal	(1.7		)	(0.1		)	(1.9		)	(2.3		)
Loss on early extinguishment of debt	(2.4		)	(18.8		)	(4.8		)	(20.0		)
Transaction costs	—			(3.3		)	—			(3.3		)
Pre-tax income	105.1			76.7			202.9			149.8
Income tax expense (1)	(42.4		)	(32.2		)	(82.1		)	(62.5		)
Income from continuing operations (2)	$	62.7		$	44.5		$	120.8		$	87.3
Basic shares	89.3			89.8			89.4			88.4
Diluted shares	99.4			101.5			99.4			101.3
Basic earnings per share (2)	$	0.70		$	0.49		$	1.34		$	0.96
Diluted earnings per share (2)	$	0.65		$	0.47		$	1.26		$	0.91

⁽¹⁾  Current income tax expense for the three months ended June 30, 2016 and 2015 was $4.0 million and $3.4 million, respectively. Current income tax expense for the six months ended June 30, 2016 and 2015 was $9.0 million and $6.9 million, respectively.

⁽²⁾  Income from continuing operations attributable to HealthSouth.

11

HealthSouth Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	Q2					6 Months
	2016			2015		2016			2015
Earnings per share, as reported	$	0.65		$	0.47	$	1.26		$	0.91
Adjustments, net of tax:
Government, class action, and related settlements	—			—		—			0.05
Professional fees — accounting, tax, and legal	0.01			—		0.01			0.01
Mark-to-market adjustments for stock appreciation rights	0.02			—		—			—
Transaction costs	—			0.02		—			0.02
Loss on early extinguishment of debt	0.01			0.11		0.03			0.12
Sale of hospital	(0.01		)	—		(0.01		)	—
Adjusted earnings per share*	$	0.69		$	0.59	$	1.30		$	1.11

* Adjusted EPS may not sum due to rounding.

12

HealthSouth Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Three Months Ended June 30, 2016
				Adjustments
	As Reported			Professional Fees - Accounting, Tax, and Legal			Mark-to-Market Adjustment for Stock Appreciation Rights			Loss on Early Extinguishment of Debt			Sale of Hospital			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	204.3		$	—		$	—		$	—		$	—		$	204.3
Depreciation and amortization	(42.9		)	—			—			—			—			(42.9		)
Professional fees - accounting, tax, and legal	(1.7		)	1.7			—			—			—			—
Loss on early extinguishment of debt	(2.4		)	—			—			2.4			—			—
Interest expense and amortization of debt discounts and fees	(43.4		)	—			—			—			—			(43.4		)
Stock-based compensation	(8.6		)	—			2.8			—			—			(5.8		)
Loss on disposal or impairment of assets	(0.2		)	—			—			—			(0.9		)	(1.1		)
Income from continuing operations before income tax expense	105.1			1.7			2.8			2.4			(0.9		)	111.1
Provision for income tax expense	(42.4		)	(0.7		)	(1.1		)	(1.0		)	0.4			(44.8		)
Income from continuing operations attributable to HealthSouth	$	62.7		$	1.0		$	1.7		$	1.4		$	(0.5	)	$	66.3
Add: Interest on convertible debt, net of tax	2.4															2.4
Numerator for diluted earnings per share	$	65.1														$	68.7
Diluted earnings per share from continuing operations**	$	0.65		$	0.01		$	0.02		$	0.01		$	(0.01	)	$	0.69
Diluted shares used in calculation	99.4

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

13

HealthSouth Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Three Months Ended June 30, 2015
				Adjustments
	As Reported			Professional Fees - Accounting, Tax, and Legal		Transaction Costs			Loss on Early Extinguishment of Debt			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	169.5		$	—	$	—		$	—		$	169.5
Depreciation and amortization	(32.7		)	—		—			—			(32.7		)
Professional fees - accounting, tax, and legal	(0.1		)	0.1		—			—			—
Loss on early extinguishment of debt	(18.8		)	—		—			18.8			—
Interest expense and amortization of debt discounts and fees	(30.9		)	—		—			—			(30.9		)
Stock-based compensation	(6.2		)	—		—			—			(6.2		)
Loss on disposal or impairment of assets	(0.8		)	—		—			—			(0.8		)
Transaction costs	(3.3		)	—		3.3			—			—
Income from continuing operations before income tax expense	76.7			0.1		3.3			18.8			98.9
Provision for income tax expense	(32.2		)	—		(1.3		)	(7.5		)	(41.0		)
Income from continuing operations attributable to HealthSouth	$	44.5		$	0.1	$	2.0		$	11.3		$	57.9
Add: Interest on convertible debt, net of tax	2.3											2.3
Numerator for diluted earnings per share	$	46.8										$	60.2
Diluted earnings per share from continuing operations**	$	0.47		$	—	$	0.02		$	0.11		$	0.59
Diluted shares used in calculation	101.5

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

14

HealthSouth Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Six Months Ended June 30, 2016
				Adjustments
	As Reported			Professional Fees - Accounting, Tax, and Legal			Mark-to-Market Adjustment for Stock Appreciation Rights			Loss on Early Extinguishment of Debt			Sale of Hospital			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	396.4		$	—		$	—		$	—		$	—		$	396.4
Depreciation and amortization	(85.3		)	—			—			—			—			(85.3		)
Professional fees - accounting, tax, and legal	(1.9		)	1.9			—			—			—			—
Loss on early extinguishment of debt	(4.8		)	—			—			4.8			—			—
Interest expense and amortization of debt discounts and fees	(88.0		)	—			—			—			—			(88.0		)
Stock-based compensation	(13.1		)	—			0.5			—			—			(12.6		)
Loss on disposal or impairment of assets	(0.4		)	—			—			—			(0.9		)	(1.3		)
Income from continuing operations before income tax expense	202.9			1.9			0.5			4.8			(0.9		)	209.2
Provision for income tax expense	(82.1		)	(0.8		)	(0.2		)	(1.9		)	0.4			(84.6		)
Income from continuing operations attributable to HealthSouth	$	120.8		$	1.1		$	0.3		$	2.9		$	(0.5	)	$	124.6
Add: Interest on convertible debt, net of tax	4.8															4.8
Numerator for diluted earnings per share	$	125.6														$	129.4
Diluted earnings per share from continuing operations**	$	1.26		$	0.01		$	—		$	0.03		$	(0.01	)	$	1.30
Diluted shares used in calculation	99.4

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

15

HealthSouth Corporation and Subsidiaries

Supplemental Information

Adjusted Earnings Per Share

	For the Six Months Ended June 30, 2015
				Adjustments
	As Reported			Government, Class Action, and Related Settlements			Professional Fees - Accounting, Tax, and Legal			Transaction Costs			Loss on Early Extinguishment of Debt			As Adjusted
	(In Millions, Except Per Share Amounts)
Adjusted EBITDA*	$	325.6		$	—		$	—		$	—		$	—		$	325.6
Depreciation and amortization	(64.6		)	—			—			—			—			(64.6		)
Government, class action, and related settlements	(8.0		)	8.0			—			—			—			—
Professional fees - accounting, tax, and legal	(2.3		)	—			2.3			—			—			—
Loss on early extinguishment of debt	(20.0		)	—			—			—			20.0			—
Interest expense and amortization of debt discounts and fees	(62.7		)	—			—			—			—			(62.7		)
Stock-based compensation	(15.6		)	—			—			—			—			(15.6		)
Gain on disposal or impairment of assets	0.7			—			—			—			—			0.7
Transaction costs	(3.3		)	—			—			3.3			—			—
Income from continuing operations before income tax expense	149.8			8.0			2.3			3.3			20.0			183.4
Provision for income tax expense	(62.5		)	(3.2		)	(0.9		)	(1.3		)	(8.0		)	(75.9		)
Income from continuing operations attributable to HealthSouth	$	87.3		$	4.8		$	1.4		$	2.0		$	12.0		$	107.5
Add: Interest on convertible debt, net of tax	4.6															4.6
Numerator for diluted earnings per share	$	91.9														$	112.1
Diluted earnings per share from continuing operations**	$	0.91		$	0.05		$	0.01		$	0.02		$	0.12		$	1.11
Diluted shares used in calculation	101.3

* Reconciliation to GAAP provided on page 17

** Adjusted EPS may not sum across due to rounding.

16

HealthSouth Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Income to Adjusted EBITDA

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(In Millions)
Net income	$	81.2		$	60.2		$	157.9		$	119.2
Loss from discontinued operations, net of tax, attributable to HealthSouth	0.1			1.6			0.2			1.9
Provision for income tax expense	42.4			32.2			82.1			62.5
Interest expense and amortization of debt discounts and fees	43.4			30.9			88.0			62.7
Professional fees—accounting, tax, and legal	1.7			0.1			1.9			2.3
Government, class action, and related settlements	—			—			—			8.0
Loss on early extinguishment of debt	2.4			18.8			4.8			20.0
Net noncash loss (gain) on disposal or impairment of assets	0.2			0.8			0.4			(0.7		)
Depreciation and amortization	42.9			32.7			85.3			64.6
Stock-based compensation expense	8.6			6.2			13.1			15.6
Net income attributable to noncontrolling interests	(18.6		)	(17.3		)	(37.3		)	(33.8		)
Transaction costs	—			3.3			—			3.3
Adjusted EBITDA	$	204.3		$	169.5		$	396.4		$	325.6

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

	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31, 2015
	2016			2015			2016			2015
	In Millions
Total segment Adjusted EBITDA	$	230.1		$	189.5		$	449.6		$	370.8		$	774.1
General and administrative expenses	(34.4		)	(32.1		)	(66.3		)	(66.7		)	(133.3		)
Depreciation and amortization	(42.9		)	(32.7		)	(85.3		)	(64.6		)	(139.7		)
(Loss) gain on disposal or impairment of assets	(0.2		)	(0.8		)	(0.4		)	0.7			(2.6		)
Government, class action, and related settlements	—			—			—			(8.0		)	(7.5		)
Professional fees - accounting, tax, and legal	(1.7		)	(0.1		)	(1.9		)	(2.3		)	(3.0		)
Loss on early extinguishment of debt	(2.4		)	(18.8		)	(4.8		)	(20.0		)	(22.4		)
Interest expense and amortization of debt discounts and fees	(43.4		)	(30.9		)	(88.0		)	(62.7		)	(142.9		)
Net income attributable to noncontrolling interests	18.6			17.3			37.3			33.8			69.7
Gain related to SCA equity interest	—			2.6			—			2.6			3.2
Income from continuing operations before income tax expense	$	123.7		$	94.0		$	240.2		$	183.6		$	395.6

17

HealthSouth Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
	2016			2015			2016			2015			2015			2014
	(In Millions)
Net cash provided by operating activities	$	152.2		$	102.9		$	311.9		$	204.9		$	484.8		$	444.9
Provision for doubtful accounts	(15.4		)	(10.9		)	(31.9		)	(22.5		)	(47.2		)	(31.6		)
Professional fees—accounting, tax, and legal	1.7			0.1			1.9			2.3			3.0			9.3
Interest expense and amortization of debt discounts and fees	43.4			30.9			88.0			62.7			142.9			109.2
Equity in net income of nonconsolidated affiliates	2.4			2.3			4.8			3.9			8.7			10.7
Net income attributable to noncontrolling interests in continuing operations	(18.6		)	(17.3		)	(37.3		)	(33.8		)	(69.7		)	(59.7		)
Amortization of debt-related items	(3.4		)	(3.0		)	(6.8		)	(6.3		)	(14.3		)	(12.7		)
Distributions from nonconsolidated affiliates	(1.3		)	(1.8		)	(3.0		)	(3.7		)	(7.7		)	(12.6		)
Current portion of income tax expense	4.0			3.4			9.0			6.9			14.8			13.3
Change in assets and liabilities	36.9			45.2			55.2			101.2			147.1			90.1
Net premium paid on bond transactions	2.0			11.8			3.9			3.8			3.9			4.3
Net cash used in operating activities of discontinued operations	0.3			0.2			0.5			0.3			0.7			1.2
Transaction costs	—			3.3			—			3.3			12.3			—
Encompass transaction costs	—			—			—			—			—			9.3
Other	0.1			2.4			0.2			2.6			3.2			1.9
Consolidated Adjusted EBITDA	$	204.3		$	169.5		$	396.4		$	325.6		$	682.5		$	577.6

18

HealthSouth Corporation and Subsidiaries

Supplemental Information

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(In Millions)
Net cash provided by operating activities	$	152.2		$	102.9		$	311.9		$	204.9
Impact of discontinued operations	0.3			0.2			0.5			0.3
Net cash provided by operating activities of continuing operations	152.5			103.1			312.4			205.2
Capital expenditures for maintenance	(22.9		)	(18.2		)	(40.6		)	(36.5		)
Dividends paid on convertible perpetual preferred stock	—			(1.5		)	—			(3.1		)
Distributions paid to noncontrolling interests of consolidated affiliates	(18.0		)	(13.0		)	(33.6		)	(26.2		)
Items non-indicative of ongoing operations:
Net premium on bond issuance/repayment	2.0			11.8			3.9			3.8
Encompass transaction costs and related assumed liabilities	—			—			0.5			17.7
Transaction costs	—			1.6			0.3			1.6
Cash paid for:
Professional fees—accounting, tax, and legal	1.7			2.7			1.9			3.4
Government, class action, and related settlements	—			8.0			—			8.0
Adjusted free cash flow	$	115.3		$	94.5		$	244.8		$	173.9

For the three months ended June 30, 2016, net cash used in investing activities was $66.1 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended June 30, 2016 was $89.1 million and resulted primarily from the redemption of $50 million of 7.75% Senior Notes due 2022 in May 2016, cash dividends paid on common stock, distributions paid to noncontrolling interests of consolidated affiliates, and repurchases of common stock.

For the three months ended June 30, 2015, net cash used in investing activities was $81.0 million and resulted primarily from acquisitions of businesses, capital expenditures, and the net change in restricted cash. Net cash used in financing activities during the three months ended June 30, 2015 was $184.7 million and resulted primarily from the redemption of the Company's 8.125% Senior Notes due 2020.

For the six months ended June 30, 2016, net cash used in investing activities was $105.6 million and resulted primarily from capital expenditures. Net cash used in financing activities during the six months ended June 30, 2016 was $197.7 million and resulted primarily from cash dividends on common stock, distributions paid to noncontrolling interests of consolidated affiliates, common stock repurchases, and net debt payments

For the six months ended June 30, 2015, net cash used in investing activities was $126.7 million and resulted primarily from capital expenditures and acquisitions of businesses. Net cash used in financing activities during the six months ended June 30, 2015 was $99.4 million and resulted primarily from cash dividends on common stock, distributions paid to noncontrolling interests of consolidated affiliates, and net debt payments.

19

HealthSouth Corporation and Subsidiaries

Forward-Looking Statements

Statements contained in this press release which are not historical facts, such as those relating to financial guidance and anticipated acquisitions, are forward-looking statements. In addition, HealthSouth, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date hereof, and HealthSouth undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information, involve a number of risks and uncertainties, and relate to, among other things, future events, HealthSouth's plan to repurchase its debt or equity securities, dividend strategies, effective income tax rates, HealthSouth's business strategy, its financial plans, its future financial performance, its projected business results or model, its ability to return value to shareholders, its projected capital expenditures, its leverage ratio, its acquisition opportunities, and the impact of future legislation or regulation. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by HealthSouth include, but are not limited to, the price of HealthSouth's common stock as it affects the Company's willingness and ability to repurchase shares and the financial and accounting effects of any repurchases; any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings involving HealthSouth, including its pending DOJ and HHS-OIG investigations and any matters related to yet undiscovered issues, if any, at Encompass, Reliant, or CareSouth; any adverse effects on HealthSouth's stock price resulting from the integration of Encompass, Reliant, or CareSouth; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of HealthSouth's information systems, including unauthorized access to or theft of patient, business associate, or other sensitive information or inability to provide patient care because of system unavailability as well as unforeseen issues, if any, related to integration of Encompass' systems; the ability to successfully integrate Encompass, Reliant, or CareSouth, including realization of anticipated tax benefits, revenues, and cost savings, minimizing the negative impact on margins arising from the changes in staffing and other operating practices, and avoidance of unforeseen exposure to liabilities; significant changes in HealthSouth's management team; HealthSouth's ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with its growth strategy; changes, delays in (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for HealthSouth's services by governmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels, including as part of national healthcare reform and deficit reduction; competitive pressures in the healthcare industry and HealthSouth's response thereto; HealthSouth's ability to obtain and retain favorable arrangements with third-party payors; HealthSouth's ability to control costs, particularly labor and employee benefit costs, including group medical expenses; adverse effects resulting from coverage determinations made by Medicare Administrative Contractors regarding its Medicare reimbursement claims and lengthening delays in HealthSouth's ability to recover improperly denied claims through the administrative appeals process on a timely basis; HealthSouth's ability to adapt to changes in the healthcare delivery system, including involvement in coordinated care initiatives or programs that may arise with its referral sources; HealthSouth's ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages and the impact on HealthSouth's labor expenses from potential union activity and staffing shortages; general conditions in the economy and capital markets, including any crisis resulting from uncertainty in the sovereign debt market; the increase in the costs of defending and insuring against alleged professional liability claims and HealthSouth's ability to predict the estimated costs related to such claims; and other factors which may be identified from time to time in HealthSouth's SEC filings and other public announcements, including HealthSouth's Form 10‑K for the year ended December 31, 2015 and Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016, when filed.

20

EX-99.2

Second Quarter 2016 Earnings Call July 29, 2016 SUPPLEMENTAL INFORMATION

2 The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect HealthSouth’s current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, capital expenditures, development activities, dividend strategies, repurchases of securities, effective tax rates, financial performance, and business model. These estimates, projections and other forward-looking information are based on assumptions HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual events or results, and those differences may be material. There can be no assurance any estimates, projections or forward-looking information will be realized. All such estimates, projections and forward-looking information speak only as of the date hereof. HealthSouth undertakes no duty to publicly update or revise the information contained herein. You are cautioned not to place undue reliance on the estimates, projections and other forward-looking information in this presentation as they are based on current expectations and general assumptions and are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the year ended December 31, 2015, the form 10-Q for the quarters ended March 31, 2016 and June 30, 2016, when filed, and in other documents HealthSouth previously filed with the SEC, many of which are beyond its control, that may cause actual events or results to differ materially from the views, beliefs and estimates expressed herein. Note Regarding Presentation of Non-GAAP Financial Measures The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA, adjusted earnings per share, and adjusted free cash flow. Schedules are attached that reconcile the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. HealthSouth’s Form 8-K, dated July 28, 2016, to which the following supplemental information is attached as Exhibit 99.2, provides further explanation and disclosure regarding HealthSouth’s use of non-GAAP financial measures and should be read in conjunction with this supplemental information. Forward-Looking Statements

3 Table of Contents Q2 2016 Summary................................................................................................................................................. 4-5 Inpatient Rehabilitation Segment ........................................................................................................................... 6-7 Home Health & Hospice Segment ......................................................................................................................... 8-9 Earnings per Share ................................................................................................................................................ 10-11 Adjusted Free Cash Flow....................................................................................................................................... 12 Guidance................................................................................................................................................................ 13-14 Appendix Map of Locations.................................................................................................................................................... 16 Clinical Collaboration ............................................................................................................................................. 17 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment.......................................................................... 18 Expansion Activity .................................................................................................................................................. 19 Business Outlook: Revenue Assumptions ............................................................................................................ 20 Adjusted Free Cash Flow and Tax Assumptions.................................................................................................... 21 Free Cash Flow Priorities....................................................................................................................................... 22 Debt Schedule and Maturity Profile ....................................................................................................................... 23-24 New-Store/Same-Store IRF Growth ...................................................................................................................... 25 Payment Sources (Percent of Revenues).............................................................................................................. 26 Stroke Guidelines Released by AHA/ASA ............................................................................................................. 27 Inpatient Rehabilitation Operational and Labor Metrics ......................................................................................... 28 Home Health & Hospice Operational Metrics ........................................................................................................ 29 Share Information .................................................................................................................................................. 30 Segment Operating Results................................................................................................................................... 31-33 Reconciliations to GAAP........................................................................................................................................ 34-42 End Notes .............................................................................................................................................................. 43-45

4 Q2 2016 Summary (Q2 2016 vs. Q2 2015) Growth (In Millions) Q2 2016 Q2 2015 Dollars Percent HealthSouth Consolidated Net operating revenues $ 920.7 $ 764.4 $ 156.3 20.4% Adjusted EBITDA $ 204.3 $ 169.5 $ 34.8 20.5% Inpatient Rehabilitation Segment Net operating revenues $ 752.6 $ 645.3 $ 107.3 16.6% Adjusted EBITDA $ 204.1 $ 170.5 $ 33.6 19.7% Home Health and Hospice Segment Net operating revenues $ 168.1 $ 119.1 $ 49.0 41.1% Adjusted EBITDA $ 26.0 $ 19.0 $ 7.0 36.8% Major takeaways: u Strong revenue, volume, and Adjusted EBITDA growth in both segments Ÿ 13.6% discharge growth for IRFs (same-store = 1.9%) Ÿ 52.7% admissions growth for home health (same-store = 11.1%) u Adjusted EPS grew 16.9% to $0.69 per diluted share ($0.59 per diluted share in Q2 2015) - see page 11. u Adjusted free cash flow grew 22.0% to $115.3 million ($94.5 million in Q2 2015). Ÿ Adjusted free cash flow for the first six months of 2016 grew 40.8% to $244.8 million ($173.9 million in YTD 2015). Reconciliations to GAAP provided on pages 34-42

5 Q2 2016 Summary (cont.) u Balance sheet Ÿ Reduced debt by ~$30 million (~$85 million year to date) ü Reduced leverage ratio by 0.2x to 4.1x - See page 23. Ÿ Redeemed $50 million of 7.75% Senior Notes due 2022 in May 2016 Ÿ Moody’s revised its rating outlook on the Company from negative to stable. Ÿ Issued notice for redemption of remaining outstanding principal balance of $76 million of the 2022 Notes to be completed in September 2016 ü Redemption price decreases from 103.875% to 102.583% on September 15, 2016 ü Expect to record ~$3 million loss on early extinguishment of debt in Q3 2016 ü Estimated cash interest savings of ~$1 million in 2016 u Expansion Activity (see page 19) Ÿ 11 IRF development projects underway ü Two new states - Oklahoma and North Carolina Ÿ Expanded existing hospitals by 10 beds Ÿ Acquired Camellia Home Health and Hospice (2 home health and 2 hospice locations in Marietta and Lawrenceville, GA) Ÿ Opened new home health location in New Port Richey, FL u Shareholder distributions Ÿ Paid quarterly cash dividend of $0.23 per share on April 15, 2016 Ÿ Declared a $0.23 per share quarterly cash dividend paid on July 15, 2016 Ÿ Declared a $0.24 per share quarterly cash dividend on July 21, 2016 (to be paid on October 17, 2016) Ÿ Repurchased 287,672 shares of common stock for ~$11 million in open market transactions

6 Inpatient Rehabilitation Segment - Revenue Q2 Q2 Favorable/ ($millions) 2016 2015 (Unfavorable) Net operating revenues: Inpatient $ 721.2 $ 618.7 16.6% Outpatient and other 31.4 26.6 18.0% Total segment revenue $ 752.6 $ 645.3 16.6% (Actual Amounts) Discharges 41,365 36,408 13.6% Same-store discharge growth 1.9% Net patient revenue / discharge $ 17,435 $ 16,994 2.6% u Revenue growth was driven by same-store and new-store volume growth. u New-store discharge growth resulted from the acquisitions of Reliant (October 2015) and Cardinal Hill (May 2015), a joint venture in Hot Springs, AR (February 2016), and the opening of Franklin, TN (December 2015). u Revenue per discharge for Q2 2015 included the effect of a negative retroactive SSI(1) adjustment of ~ $5 million. u Outpatient and other revenue increase was due primarily to the acquisition of Reliant. Refer to pages 43-45 for end notes.

7 Inpatient Rehabilitation Segment - Adjusted EBITDA Q2 % of Revenue Q2 % of Revenue($millions) 2016 2015 Net operating revenues $ 752.6 $ 645.3 Less: Provision for doubtful accounts (14.5) 1.9% (10.2) 1.6% Net operating revenues less provision for doubtful accounts 738.1 635.1 Operating expenses: Salaries and benefits (366.1) 48.6% (317.6) 49.2% Other operating expenses(a) (106.8) 14.2% (93.5) 14.5% Supplies (31.8) 4.2% (29.9) 4.6% Occupancy costs (15.4) 2.0% (10.7) 1.7% (154.0) 20.5% (134.1) 20.8% Other income 0.7 0.4 Equity in nonconsolidated affiliates 2.2 2.3 Noncontrolling interests (16.8) (15.6) Segment Adjusted EBITDA $ 204.1 $ 170.5 Percent change 19.7% In arriving at Adjusted EBITDA, the following were excluded: (a) Loss on disposal or impairment of assets $ 0.2 $ 0.9 Segment Adjusted EBITDA for the quarter of $204.1 million - Supplies expense as a percent of revenue decreased primarily due to continued supply chain initiatives. - Salaries and benefits in Q2 2016 included the positive impact of $2.4 million in rebates associated with a contractual periodic pharmacy benefit reconciliation for 2014 and 2015. - Occupancy costs as a percent of revenue increased due to the acquisition of Reliant. - Bad debt expense as a percent of revenue increased due to administrative payment delays at the Company's largest Medicare Administrative Contractor. Reconciliations to GAAP provided on pages 34-42 Refer to pages 43-45 for end notes. - Q2 2015 expense ratios were negatively impacted by the $5 million SSI(1) adjustment in that quarter.

8 Home Health and Hospice Segment - Revenue Q2 Q2 Favorable/ ($millions) 2016 2015 (Unfavorable) Net operating revenues: Home health revenue $ 157.1 $ 111.5 40.9 % Hospice revenue 11.0 7.6 44.7 % Total segment revenue $ 168.1 $ 119.1 41.1 % (Actual Amounts) Admissions 25,753 16,862 52.7 % Same-store admissions growth 11.1 % Episodes 45,774 31,817 43.9 % Same-store episode growth 12.4 % Revenue per episode $ 3,033 $ 3,082 (1.6)% u Revenue growth was driven by strong same-store and new-store volume growth. u New-store admission and episode growth resulted from the acquisition of CareSouth and Encompass’ other acquisitions throughout 2015. u Revenue per episode was impacted by: Ÿ Medicare reimbursement rate cuts that became effective January 1, 2016 Ÿ Higher percentage of patients requiring therapy visits Ÿ Lower revenue per episode at CareSouth due to patient mix

9 Q2 % of Revenue Q2 % of Revenue($millions) 2016 2015 Net operating revenues $ 168.1 $ 119.1 Less: Provision for doubtful accounts (0.9) 0.5% (0.7) 0.6% Net operating revenues less provision for doubtful accounts 167.2 118.4 Operating expenses: Cost of services (81.6) 48.5% (56.7) 47.6% Support and overhead costs(a) (58.0) 34.5% (41.0) 34.4% (139.6) 83.0% (97.7) 82.0% Equity in net income of nonconsolidated affiliates 0.2 — Noncontrolling interests (1.8) (1.7) Segment Adjusted EBITDA $ 26.0 $ 19.0 Percent change 36.8% In arriving at Adjusted EBITDA, the following was excluded: (a) Gain on disposal or impairment of assets — (0.1) Home Health and Hospice Segment - Adjusted EBITDA Segment Adjusted EBITDA for the quarter of $26.0 million. - Operating expenses as a percent of net operating revenues increased primarily due to lower average revenue per episode, higher cost per visit driven by an increased percentage of therapy patients, merit and benefit cost increases, and expenses related to the integration of CareSouth. * Reconciliation to GAAP provided on pages 29-31 Reconciliations to GAAP provided on pages 34-42

10 Earnings per Share - As Reported Q2 6 Months (In Millions, Except Per Share Data) 2016 2015 2016 2015 Inpatient rehabilitation segment Adjusted EBITDA $ 204.1 $ 170.5 $ 401.0 $ 334.9 Home health and hospice segment Adjusted EBITDA 26.0 19.0 48.6 35.9 General and administrative expenses (25.8) (22.6) (53.2) (47.8) Gain related to SCA equity interest — 2.6 — 2.6 Consolidated Adjusted EBITDA 204.3 169.5 396.4 325.6 Interest expense and amortization of debt discounts and fees (43.4) (30.9) (88.0) (62.7) Depreciation and amortization (42.9) (32.7) (85.3) (64.6) Stock-based compensation expense (8.6) (6.2) (13.1) (15.6) Other, including noncash (loss) gain on disposal or impairment of assets (0.2) (0.8) (0.4) 0.7 109.2 98.9 209.6 183.4 Certain items non-indicative of ongoing operations: Government, class action, and related settlements — — — (8.0) Loss on early extinguishment of debt (2.4) (18.8) (4.8) (20.0) Professional fees - accounting, tax, and legal (1.7) (0.1) (1.9) (2.3) Transaction costs — (3.3) — (3.3) Pre-tax income 105.1 76.7 202.9 149.8 Income tax expense(2) (42.4) (32.2) (82.1) (62.5) Income from continuing operations* $ 62.7 $ 44.5 $ 120.8 $ 87.3 Interest and amortization on 2.0% Convertible Senior Subordinated Notes (net of tax)(3) 2.4 2.3 4.8 4.6 Diluted shares (see page 30) 99.4 101.5 99.4 101.3 Diluted earnings per share*(3) $ 0.65 $ 0.47 $ 1.26 $ 0.91 u Earnings per share for the second quarter and first half of 2016 were impacted by: Ÿ Higher interest expense related to the financing of the Reliant and CareSouth acquisitions Ÿ Higher depreciation and amortization resulting from acquisitions and capital investments Ÿ Loss on early extinguishment of debt associated with the redemptions of the 7.75% Senior Notes due 2022 Ÿ Lower share count resulting from stock repurchases in Q4 2015 and the first half of 2016 u Earnings per share for the second quarter and first half of 2015 were impacted by: Ÿ Loss on early extinguishment of debt associated with the redemption of the 8.125% Senior Notes due 2020 Ÿ General Medicine settlement Ÿ Reliant transaction costs * Earnings per share are determined using income from continuing operations attributable to HealthSouth. Refer to pages 43-45 for end notes.

11 Q2 6 Months 2016 2015 2016 2015 Earnings per share, as reported $ 0.65 $ 0.47 $ 1.26 $ 0.91 Adjustments, net of tax: Government, class action, and related settlements — — — 0.05 Professional fees — accounting, tax, and legal 0.01 — 0.01 0.01 Mark-to-market adjustment for stock appreciation rights(5) 0.02 — — — Transaction costs — 0.02 — 0.02 Loss on early extinguishment of debt 0.01 0.11 0.03 0.12 Sale of hospital (0.01) — (0.01) — Adjusted earnings per share* $ 0.69 $ 0.59 $ 1.30 $ 1.11 Adjusted Earnings per Share(4) * Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 39-42. Refer to pages 43-45 for end notes. Adjusted earnings per share removes the impact of items that are deemed to be non- indicative of the Company’s ongoing operations from the earnings per share calculation.

12 Adjusted Free Cash Flow 6 Mos. 2015 Adjusted EBITDA Cash Interest Expense Cash Tax Payments, Net of Refunds Working Capital and Other Maintenance Capital Expenditures Preferred Dividends Adjusted Free Cash Flow 6 Mos. 2016 $173.9 $70.8 ($24.8) ($2.7) $28.6 ($4.1) $3.1 $244.8 Adjusted Free Cash Flow(6) - Year to Date Reconciliations to GAAP provided on pages 34-42 Refer to pages 43-45 for end notes. u Adjusted free cash flow for the first six months of 2016 grew 40.8% primarily as a result of increased Adjusted EBITDA. ü Cash interest expense increased due to the financing of the Reliant and CareSouth acquisitions. üWorking capital changes were mainly attributable to the timing of payroll-related liabilities(7). u Quarterly free cash flow for the remainder of 2016 will be impacted by the timing of income tax payments and maintenance capital expenditures, as well as working capital changes. See page 21.

13 Adjusted EBITDA Adjusted Earnings per Share from Continuing Operations Attributable to HealthSouth Revised Guidance Net Operating Revenues Previous Full-Year Guidance (Provided on April 26, 2016) Revised 2016 Full-Year Guidance Net Operating Revenues $3,600 million to $3,700 million Adjusted EBITDA $775 million to $795 million Adjusted Earnings per Share from Continuing Operations Attributable to HealthSouth $2.44 to $2.56 Projected Growth Over 2015 $3,580 million to $3,680 million $770 million to $790 million $2.37 to $2.49 13% to 17% 13% to 17% 8% to 14% +$20 million +$5 million +$0.07 per share

14 Inpatient Rehabilitation u Full-year contribution from Reliant and other 2015 acquisitions and openings Ÿ Transitioning to HLS business model u Continued evolution of payor mix Ÿ Managed care and Medicaid increases expected to moderate in 2016 as compared to 2015 u Estimated 1.6% increase in Medicare pricing for Q1 through Q3; 1.7% for Q4 u Merit increase of 2.5% to 3.0% effective October 1, 2016 u Moderating increase in group medical expense compared to increase experienced in 2015 u Bad debt expense of 1.8% to 2.0% of net operating revenues in 2016 Guidance Considerations Home Health and Hospice u Full-year contribution from CareSouth and other 2015 acquisitions and openings Ÿ Transitioning to Encompass business model u Estimated 1.7% decrease in Medicare pricing (effective January 1, 2016) u Estimated $1.5 million negative impact in Q4 2016 based on 2017 proposed rule (applicable to all episodes that end after December 31st) - See page 20. u Increase in administrative costs related to pre-claim review demonstration u Clinical collaboration with HealthSouth IRFs Consolidated u Redemption of 2022 Notes Ÿ Redemption of remaining outstanding principal balance of $76 million in September 2016 u Diluted share count of 100.0 million shares u Tax rate of approximately 41%

Appendix

16 HealthSouth: A Leading Provider of Post-Acute Care 58% of HealthSouth's IRFs are located within a 30-mile radius of an Encompass location. Inpatient Rehabilitation Portfolio - As of June 30, 2016 121* Inpatient Rehabilitation Hospitals • 34 operate as joint ventures with acute care hospitals 29 Number of States (plus Puerto Rico) ~ 27,900 Employees Key Statistics - Trailing 4 Quarters ~ $2.9 Billion Revenue 160,100 Inpatient Discharges 628,650 Outpatient Visits Encompass Home Health and Hospice Portfolio – As of June 30, 2016 182 Home Health Locations 7 Pediatric Home Health Locations 29 Hospice Locations 24 Number of States ~ 7,600 Employees Key Statistics - Trailing 4 Quarters ~ $609 million Revenue 165,857 Home Health Episodes 2,743 Hospice Admissions IRF Marketshare 11% of IRFs 21% of Licensed Beds 28% of Patients Served Home Health and Hospice Marketshare 4th largest provider of Medicare-certified skilled home health services * The decrease in the number of inpatient rehabilitation hospitals from March 31, 2016 to June 30, 2016 is related to the sale of the hospital in Beaumont, Texas on June 1, 2016.

17 Clinical Collaboration All Markets Q2 2015 Q2 2016 17,907 19,977 2,116 3,23810.6%Collaboration Rate 13.9% Collaboration Rate Overlap Markets* Q2 2015 Q2 2016 9,041 10,307 2,037 3,19118.4%Collaboration Rate 23.6% Collaboration Rate HealthSouth IRF Discharges to non-Encompass Home Health HealthSouth IRF Discharges to Encompass Home Health * Generally defined as a HealthSouth IRF located within a 30-mile radius of an Encompass location. - Represents discharges from all payors -

18 Pre-Payment Claims Denials - Inpatient Rehabilitation Segment Background Ÿ For several years, under programs designated as “widespread probes,” certain Medicare Administrative Contractors (“MACs”) have conducted pre-payment claim reviews and denied payment for certain diagnosis codes. – Pre-payment claim denials increased during 2014 and 2015 due to an announced widespread review of IRF neurological billing codes and expansion of the ongoing lower extremity code denials. Ÿ HealthSouth appeals most of these denials. On claims it takes to an administrative law judge (“ALJ”), the highest level of appeal, HealthSouth historically has experienced an approximate 70% success rate. – MACs identify medical documentation issues as a leading basis for denials. – HealthSouth's investment in clinical information systems and its medical services department has further improved its documentation and reduced technical denials. Ÿ By statute, ALJ decisions are due within 90 days of a request for hearing, but appeals are taking years. A federal court is considering remedies to address the backlog. Ÿ All providers continue to experience delays in the adjudication process. – For YTD June 2016, 91 of HealthSouth's appeals were heard at the ALJ level. Most of the appeals are of claims denied in 2011 and 2012. – During the same period, HealthSouth had 2,311 new claim denials. At current rates, appeals from these denials may not be heard for four years or more. Ÿ Reserves for pre-payment claim denials are recorded via the provision for doubtful accounts when HealthSouth receives the request for additional documents for review from the MAC. Impact to Income Statement Period New Denials Collections of Previously Denied Claims Bad Debt Expense for New Denials Update of Success Rate (In Millions) Q2 2016 $18.7 $(4.9) $4.6 $— Q1 2016 22.7 (8.4) 6.0 — Q4 2015 22.5 (4.1) 5.6 (1.3) Q3 2015 22.0 (4.1) 5.9 (1.1) Q2 2015 18.2 (3.8) 4.9 — Q1 2015 16.3 (3.0) 4.2 — Q4 2014 22.0 (6.6) 6.2 (3.2) Q3 2014 15.8 (0.5) 1.7 — Q2 2014 7.1 (1.7) 3.0 — Impact to Balance Sheet June 30, 2016 Dec. 31, 2015 June 30, 2015 Dec. 31, 2014 (In Millions) Pre-payment claims denials $ 140.9 $ 114.8 $ 86.6 $ 59.3 Recorded reserves (40.1) (31.2) (32.2) (22.8) Net accounts receivable from pre-payment claims denials $ 100.8 $ 83.6 $ 54.4 $ 36.5

19 Expansion Activity Inpatient Rehabilitation Facilities # of New Beds 2016 2017 2018 De Novo: Modesto, CA 50 — — Pearland, TX — 40 — Murrieta, CA — — 50 Shelby County, AL — — 34 Joint Ventures: Hot Springs, AR 40 — — Broken Arrow, OK 22 18 — Bryan, TX 49 — — Westerville, OH — 60 — Jackson, TN — 48 — Bed Expansions, net* 110 100 100 271 266 184 Home Health and Hospice # of locations December 31, 2015 213 Acquisitions 4 De Novo 2 Merged / Closed Locations (1) June 30, 2016 218 * Net bed expansions in each year may change due to the timing of certain regulatory approvals and/or construction delays. u Acquired Camellia Home Health and Hospice (2 home health and 2 hospice locations in Marietta and Lawrenceville, GA) u Opened one home health location in New Port Richey, FL Q2 2016 expansion activity highlights: u Received CON to build a 34-bed hospital in Shelby County, AL u Expect to begin operating a 22-bed unit in Broken Arrow, OK in place in Q3 2016 while free-standing hospital is constructed u Formed joint venture with Midland Health to own and operate HealthSouth’s existing IRF in Midland/Odessa, TX effective July 1st. u Expanded existing hospitals by 10 beds Ÿ 5 beds in Salisbury, MD Ÿ 5 beds in Aldie, VA u Table excludes: Ÿ a pending CON application with BJC Healthcare to build a 35-bed satellite hospital in St. Peters, MO Ÿ a pending CON application with Novant Health to build a 68-bed hospital in Winston Salem, NC 2 1 3 4 5 6 7 8 9 10 11 , OK inston-Salem, N 11 IRF DevelopmentProjects 2 New States

20 • 10% to15% annual episode growth • Includes $35-$40 million per annum in agency acquisitions Volume Inpatient Rehabilitation* Home Health & Hospice* Medicare Pricing Approx. 73% of Revenue Approx. 83% of Revenue FY 2016 Q415-Q316 FY 2017 Q416-Q317 Proposed Rule FY 2018 Q417-Q318(8) CY 2016 Q116-Q416 CY 2017 Q117-Q417 Proposed Rule CY 2018 Q118-Q418(8) Market basket update 2.4% 2.7% 1.0% 2.3% 2.8% 1.0% Healthcare reform reduction (20) bps (75) bps - - - - Healthcare reform rebasing adjustment - - - (2.4%) (2.3%) - Healthcare reform coding intensity reduction - - - (0.9%) (0.9%) (0.9%) Outlier fixed dollar loss adjustment - - - - (0.1%) - Expiration of rural add-on - - - - - Approx. (0.7%) Healthcare reform productivity adjustment (50) bps (50) bps - (40) bps (50) bps - Net impact - all providers 1.7% 1.45% 1.0% (1.4%) (1.0%) (0.6%) Impact from case mix re-weighting - - - - (1.0%) - Impact from change in outlier calculation - - - - (1.0% to 2.0%) - Estimated impact to HealthSouth(9) 1.6% 1.7% (1.7%) (3.0% to 4.0%) Business Outlook: Revenue Assumptions 2% Sequestration(10) • 3+% annual discharge growth • 10+% annual episode growth • Includes $30-$40 million per annum in agency acquisitions * Outpatient and hospice, which services accounted for 4.4% of total operating revenues as of December 31, 2015, are not included in the pricing assumptions. Refer to pages 43-45 for end notes.

21 Adjusted Free Cash Flow(6) and Tax Assumptions Certain Cash Flow Items (millions) 6 Months 2016 Actual 2016 Assumptions 2015 Actual • Cash interest expense (net of amortization of debt discounts and fees) $81.2 $160 to $165 $128.6 • Cash payments for taxes, net of refunds $7.7 $15 to $30 $9.4 • Working Capital and Other $22.1 $60 to $80 $69.2 • Maintenance CAPEX $40.6 $95 to $105 $83.1 • Dividends paid on preferred stock(11) $— $— $3.1 • Adjusted Free Cash Flow $244.8 $395 to $465 $389.0 Reconciliations to GAAP provided on pages 34-42 Refer to pages 43-45 for end notes. Quarterly free cash flow for the remainder of 2016 will be impacted by the timing of income tax payments and maintenance capital expenditures, as well as changes in working capital. u Revised cash interest expense assumptions due to the redemptions of the 2022 Notes u Decreased estimated cash payments for federal taxes based on current tax planning opportunities u Lowered upper end of range for maintenance capital expenditures due to revised expectations around timing of projects u GAAP Tax Considerations: Ÿ Gross federal NOL of ~ $72 million as of June 30, 2016 Ÿ Remaining valuation allowance of ~$28 million related to state NOLs

22 Free Cash Flow Priorities (In Millions) 6 Months 2016 2016 2015 Actuals Assumptions Actuals IRF bed expansions $10.5 $20 to $30 $20.8 New IRF’s - De novos 37.5 70 to 90 47.8 - Acquisitions — 0 to 20 786.2 New home health and hospice acquisitions 9.4 30 to 40 200.2 $57.4 $120 to $180 $1,055.0 6 Months 2016 2016 2015 Actuals Assumptions Actuals Debt redemptions (borrowings), net $85.0 $TBD $(1,060.3) Leased property purchases — TBD — Cash dividends on common stock(12) 41.9 84 77.2 Common stock repurchases 24.1 TBD 45.3 $151.0 $TBD $(937.8) Shareholder Distributions Growth in Core Business Debt Reduction Highest Priorit y • Redeemed $100 million of 2022 Notes in first half of 2016 • Issued notice for redemption of remaining outstanding principal balance of $76 million of 2022 Notes to be completed in September 2016 Increased quarterly cash dividend to $0.24 per common share ~$137 million authorization remaining as of June 30, 2016 Note: 2015 amount for debt borrowings included ~$208 million related to the Reliant hospitals' capital lease obligations. See the debt schedule on page 23. Refer to pages 43-45 for end notes.

23 Debt Schedule Change in June 30, Dec. 31, Debt vs. ($millions) 2016 2015 YE 2015 Advances under $600 million revolving credit facility, July 2020 - LIBOR +200bps $ 150.0 $ 130.0 $ 20.0 Term loan facility, July 2020 - LIBOR +200bps 432.3 443.3 (11.0) Bonds Payable: 7.75% Senior Notes due 2022 75.3 174.3 (99.0) 5.125% Senior Notes due 2023 294.9 294.6 0.3 5.75% Senior Notes due 2024 1,192.9 1,192.6 0.3 5.75% Senior Notes due 2025 343.6 343.4 0.2 2.0% Convertible Senior Subordinated Notes due 2043 270.7 265.9 4.8 Other notes payable 43.3 39.2 4.1 Capital lease obligations 283.5 288.2 (4.7) Long-term debt $ 3,086.5 $ 3,171.5 $ (85.0) Debt to Adjusted EBITDA 4.1x 4.6x Reconciliations to GAAP provided on pages 34-42 Note: The Company redeemed $100 million of the 2022 Notes in the first half of 2016 and will complete the redemption of the remainder of these notes in September 2016.

24 2015 2019 2020 2020 2021 2022 2023 2024 2025 2043 $350 Senior Notes 5.75% $1,200 Senior Notes 5.75% $320 Conv. Sr. Sub. Notes 2.0% $300 Senior Notes 5.125% $150 Drawn + $35 reserved for LC’s Holders have a put option in 2020 As of June 30, 2016* Debt Maturity Profile - Face Value ($ in millions) $415 Available $76 Senior Notes 7.75% Callable beginning November 2017 HealthSouth is positioned with a cost-efficient, flexible capital structure. Callable beginning March 2018 Revolver Revolver Capacity $434 Term Loans Fully callable; redeemed $100 million in first half of 2016; redemption price decreases from 103.875% to 102.583% in September 2016 Callable beginning September 2020 * This chart does not include ~$284 million of capital lease obligations or ~$43 million of other notes payable. See the debt schedule on page 23. The Company will complete the redemption of its 7.75% Senior Notes due 2022 in September 2016. • Expect to fund using cash on hand and capacity under revolving credit facility • Q3 2016 loss on early extinguishment of debt of ~$3 million • Estimated cash interest savings of ~ $1 million in 2016

25 25.0 20.0 15.0 10.0 5.0 0.0 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 New-Store/Same-Store IRF Growth Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Fairlawn(13) 0.6% 1.9% 1.9% 2.0% 1.1% St. Vincent’s(14) 1.3% New Store 1.7% 2.5% 2.5% 2.0% 1.0% —% 0.6% 1.8% 4.4% 5.7% 15.6% 14.2% 11.7% Same Store* 3.3% 3.2% 1.3% 0.4% 1.4% 1.9% 2.2% 2.9% 2.8% 3.9% 3.0% 2.8% 1.9% Total by Qtr. 6.3% 5.7% 3.8% 2.4% 3.0% 3.8% 4.7% 6.7% 8.3% 9.6% 18.6% 17.0% 13.6% Total by Year 5.0% 3.5% 10.9% Same-Store Year* 2.5% 1.3% 3.2% Same-Store Year UDS(15) (0.7)% (0.2)% 1.3% Altamonte Springs, FL (50 beds) Johnson City, TN (26 beds) Newnan, GA (50 beds) Middletown, DE (34 beds) Augusta, GA (58 beds) Littleton, CO (40 beds) Stuart, FL (34 beds) Reliant (857 beds) Franklin, TN (40 beds) Lexington, KY (158 beds) Savannah, GA (50 beds) Hot Springs, AR (27 beds) * Includes consolidated HealthSouth inpatient rehabilitation hospitals classified as same store during each period Refer to pages 43-45 for end notes.

26 Payment Sources (Percent of Revenues) Inpatient Rehabilitation Segment Home Health and Hospice Segment Consolidated Q2 Q2 Q2 6 Months Full Year 2016 2015 2016 2015 2016 2015 2016 2015 2015 Medicare 73.1% 72.7% 82.3% 83.9% 74.7% 74.5% 75.1% 74.7% 74.9% Medicare Advantage 7.8% 7.8% 9.0% 7.2% 8.1% 7.7% 7.9% 8.0% 7.9% Managed care 11.5% 11.4% 3.7% 2.9% 10.0% 10.1% 9.8% 10.0% 9.8% Medicaid 2.9% 2.6% 4.8% 5.8% 3.2% 3.1% 3.3% 2.9% 3.0% Other third-party payors 1.7% 2.1% —% 0.1% 1.4% 1.8% 1.4% 1.6% 1.7% Workers’ compensation 0.8% 1.1% —% —% 0.7% 0.9% 0.8% 0.9% 0.9% Patients 0.6% 0.7% 0.1% 0.1% 0.5% 0.6% 0.5% 0.6% 0.6% Other income 1.6% 1.6% 0.1% —% 1.4% 1.3% 1.2% 1.3% 1.2% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

27 Independent Research Concludes IRFs are a Better Rehabilitation Option than SNFs “The studies that have compared outcomes in hospitalized stroke patients first discharged to an IRF, a SNF, or a nursing home have generally shown that IRF patients have higher rates of return to community living and greater functional recovery, whereas patients discharged to a SNF or a nursing home have higher rehospitalization rates and substantially poorer survival.”** “If the hospital suggests sending your loved one to a skilled nursing facility after a stroke, advocate for the patient to go to an inpatient rehabilitation facility instead…”* “Whenever possible, the American Stroke Association strongly recommends that stroke patients be treated at an inpatient rehabilitation facility rather than a skilled nursing facility.  While in an inpatient rehabilitation facility, a patient participates in at least three hours of rehabilitation a day from physical therapists, occupational therapists, and speech therapists. Nurses are continuously available and doctors typically visit daily.”* * ** AHA/ASA press release, "In-patient rehab recommended over nursing homes for stroke rehab," issued May 4, 2016 (newsroom.heart.org) "Guidelines for Adult Stroke Rehabilitation and Recovery," issued May 2016 (stroke.ahajournals.org)

28 Inpatient Rehabilitation Operational and Labor Metrics Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2016 2016 2015 2015 2015 2015 2015 (In Millions) Net patient revenue-inpatient $ 721.2 $ 719.4 $ 696.8 $ 625.1 $ 618.7 $ 606.6 $ 2,547.2 Net patient revenue-outpatient and other revenues 31.4 29.8 29.1 26.5 26.6 23.7 105.9 Net operating revenues $ 752.6 $ 749.2 $ 725.9 $ 651.6 $ 645.3 $ 630.3 $ 2,653.1 (Actual Amounts) Discharges(16) 41,365 41,098 40,891 36,746 36,408 35,116 149,161 Net patient revenue per discharge $ 17,435 $ 17,505 $ 17,040 $ 17,011 $ 16,994 $ 17,274 $ 17,077 Outpatient visits 164,761 162,649 163,119 138,121 144,914 131,353 577,507 Average length of stay 12.6 12.9 12.6 12.9 13.0 13.3 12.9 Occupancy % 68.2% 68.9% 66.4% 69.6% 70.4% 72.8% 62.8% # of licensed beds* 8,430 8,481 8,404 7,422 7,374 7,100 8,404 Occupied beds 5,749 5,843 5,580 5,166 5,191 5,169 5,278 Full-time equivalents (FTEs)(17) 19,503 19,352 19,136 17,782 17,601 17,002 17,880 Contract labor 205 194 152 141 118 116 132 Total FTE and contract labor 19,708 19,546 19,288 17,923 17,719 17,118 18,012 EPOB(18) 3.43 3.35 3.46 3.47 3.41 3.31 3.41 * The decrease in licensed beds from Q1 2016 to Q2 2016 was due to the sale of the hospital in Beaumont, TX (61 beds). Refer to pages 43-45 for end notes.

29 Home Health and Hospice Operational Metrics Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2016 2016 2015 2015 2015 2015 2015 (In Millions) Net home health revenue $ 157.1 $ 150.9 $ 144.4 $ 118.3 $ 111.5 $ 103.9 $ 478.1 Net hospice and other revenue 11.0 9.7 9.0 8.7 7.6 6.4 31.7 Net operating revenues $ 168.1 $ 160.6 $ 153.4 $ 127.0 $ 119.1 $ 110.3 $ 509.8 Home Health: (Actual Amounts) Admissions(19) 25,753 25,763 22,892 18,076 16,862 16,499 74,329 Recertifications 20,432 19,453 18,909 16,542 15,103 14,485 65,039 Episodes 45,774 43,844 42,697 33,542 31,817 29,512 137,568 Average revenue per episode $ 3,033 $ 3,035 $ 3,005 $ 3,123 $ 3,082 $ 3,102 $ 3,072 Episodic visits per episode 18.9 19.1 18.2 19.6 19.4 19.6 19.1 Total visits 967,968 937,804 862,224 721,055 675,095 630,999 2,889,373 Cost per visit $ 73 $ 73 $ 73 $ 72 $ 71 $ 71 $ 72 Hospice: Admissions(20) 785 724 614 620 594 624 2,452 Patient days 71,277 63,431 59,100 55,627 49,272 40,898 204,898 Revenue per day $ 154 $ 153 $ 155 $ 156 $ 154 $ 156 $ 155 Refer to pages 43-45 for end notes.

30 Share Information Weighted Average for the Period Q2 6 Months Full Year (Millions) 2016 2015 2016 2015 2015 2014 2013 Basic shares outstanding(11) 89.3 89.8 89.4 88.4 89.4 86.8 88.1 Convertible perpetual preferred stock(11) — 0.8 — 2.0 1.0 3.2 10.5 Convertible senior subordinated notes(21) 8.5 8.2 8.5 8.2 8.3 8.2 1.0 Restricted stock awards, dilutive stock options, restricted stock units, and common stock warrants(22) 1.6 2.7 1.5 2.7 2.3 2.5 2.5 Diluted shares outstanding 99.4 101.5 99.4 101.3 101.0 100.7 102.1 End of Period Q2 6 Months Full Year (Millions) 2016 2015 2016 2015 2015 2014 2013 Basic shares outstanding(11) 89.1 90.6 89.1 90.6 89.3 86.6 86.8 Approx. Approx. Date Conversion Rate Conversion Price Convertible senior subordinated notes(21) 07/01/16 26.6011 $37.59 Refer to pages 43-45 for end notes.

31 Segment Operating Results Q2 2016 Q2 2015 IRF Home Health and Hospice Reclasses HealthSouthConsolidated IRF Home Health and Hospice Reclasses HealthSouthConsolidated Net operating revenues $ 752.6 $ 168.1 $ — $ 920.7 $ 645.3 $ 119.1 $ — $ 764.4 Less: Provision for doubtful accounts (14.5) (0.9) — (15.4) (10.2) (0.7) — (10.9) 738.1 167.2 — 905.3 635.1 118.4 — 753.5 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (366.1) — (120.0) (486.1) (317.6) — (84.2) (401.8) Other operating expenses(a) (106.8) — (14.5) (121.3) (93.5) — (9.9) (103.4) Supplies (31.8) — (2.6) (34.4) (29.9) — (1.8) (31.7) Occupancy (15.4) — (2.5) (17.9) (10.7) — (1.8) (12.5) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (81.6) 81.6 — — (56.7) 56.7 — Support and overhead costs — (58.0) 58.0 — — (41.0) 41.0 — (520.1) (139.6) — (659.7) (451.7) (97.7) — (549.4) Other income 0.7 — — 0.7 0.4 — — 0.4 Equity in net income of nonconsolidated affiliates 2.2 0.2 — 2.4 2.3 — — 2.3 Noncontrolling interest (16.8) (1.8) — (18.6) (15.6) (1.7) — (17.3) Segment Adjusted EBITDA $ 204.1 $ 26.0 $ — 230.1 $ 170.5 $ 19.0 $ — 189.5 General and administrative expenses(b)(c) (25.8) (22.6) Gain related to SCA equity interest — 2.6 Adjusted EBITDA $ 204.3 $ 169.5 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal or impairment of assets $ 0.2 $ — $ — $ 0.2 $ 0.9 $ (0.1) $ — $ 0.8 (b) Transaction costs — — — — — — — 3.3 (c) Stock-based compensation — — — 8.6 — — — 6.2 Reconciliations to GAAP provided on pages 34-42

32 Segment Operating Results Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 IRF Home Health and Hospice Reclasses HealthSouthConsolidated IRF Home Health and Hospice Reclasses HealthSouthConsolidated Net operating revenues $ 1,501.8 $ 328.7 $ — $ 1,830.5 $ 1,275.6 $ 229.4 $ — $ 1,505.0 Less: Provision for doubtful accounts (30.1) (1.8) — (31.9) (21.2) (1.3) — (22.5) 1,471.7 326.9 — 1,798.6 1,254.4 228.1 — 1,482.5 Operating Expenses: — Inpatient Rehabilitation: — Salaries and benefits (736.0) — (236.2) (972.2) (624.0) — (162.9) (786.9) Other operating expenses(a) (211.6) — (28.7) (240.3) (188.7) — (19.4) (208.1) Supplies (64.2) — (5.2) (69.4) (59.7) — (3.4) (63.1) Occupancy (31.0) — (4.9) (35.9) (21.1) — (3.5) (24.6) Home Health and Hospice: — Cost of services sold (excluding depreciation and amortization) — (160.0) 160.0 — — (110.1) 110.1 — Support and overhead costs — (115.0) 115.0 — — (79.1) 79.1 — (1,042.8) (275.0) — (1,317.8) (893.5) (189.2) — (1,082.7) Other income 1.3 — — 1.3 0.9 — — 0.9 Equity in net income of nonconsolidated affiliates 4.4 0.4 — 4.8 3.9 — — 3.9 Noncontrolling interest (33.6) (3.7) — (37.3) (30.8) (3.0) — (33.8) Segment Adjusted EBITDA $ 401.0 $ 48.6 $ — 449.6 $ 334.9 $ 35.9 $ — 370.8 General and administrative expenses(b)(c) (53.2) (47.8) Gain related to SCA equity interest — 2.6 Adjusted EBITDA $ 396.4 $ 325.6 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal or impairment of assets $ 0.7 $ (0.3) $ — $ 0.4 $ (0.6) $ (0.1) $ — $ (0.7) (b) Transaction costs — — — — — — — 3.3 (c) Stock-based compensation — — — 13.1 — — — 15.6 Reconciliations to GAAP provided on pages 34-42

33 Segment Operating Results Year Ended December 31, 2015 IRF Home Health and Hospice Reclasses HealthSouth Consolidated Net operating revenues $ 2,653.1 $ 509.8 $ — $ 3,162.9 Less: Provision for doubtful accounts (44.7) (2.5) — (47.2) 2,608.4 507.3 — 3,115.7 Operating Expenses: Inpatient Rehabilitation: Salaries and benefits (1,310.6) — (360.2) (1,670.8) Other operating expenses(a) (387.7) — (41.8) (429.5) Supplies (120.9) — (7.8) (128.7) Occupancy (46.2) — (7.7) (53.9) Home Health and Hospice: Cost of services sold (excluding depreciation and amortization) — (244.8) 244.8 — Support and overhead costs — (172.7) 172.7 — (1,865.4) (417.5) — (2,282.9) Other income 2.3 — — 2.3 Equity in net income of nonconsolidated affiliates 8.6 0.1 — 8.7 Noncontrolling interest (62.9) (6.8) — (69.7) Segment Adjusted EBITDA $ 691.0 $ 83.1 $ — 774.1 General and administrative expenses(b)(c) (94.8) Gain related to SCA equity interest 3.2 Adjusted EBITDA $ 682.5 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss (gain) on disposal or impairment of assets $ 2.8 $ (0.2) $ — $ 2.6 (b) Stock-based compensation expense — — — 26.2 (c) Transaction costs — — — 12.3 Reconciliations to GAAP provided on pages 34-42

34 Reconciliation of Net Income to Adjusted EBITDA(23) 2016 Q1 Q2 6 Months (in millions, except per share data) Total Per Share Total Per Share Total Per Share Net Income $ 76.7 $ 81.2 $ 157.9 Loss from disc ops, net of tax, attributable to HealthSouth 0.1 0.1 0.2 Net income attributable to noncontrolling interests (18.7) (18.6) (37.3) Income from continuing operations attributable to HealthSouth* 58.1 $ 0.61 62.7 $ 0.65 120.8 $ 1.26 Gov’t, class action, and related settlements — — — Pro fees - acct, tax, and legal 0.2 1.7 1.9 Provision for income tax expense 39.7 42.4 82.1 Interest expense and amortization of debt discounts and fees 44.6 43.4 88.0 Depreciation and amortization 42.4 42.9 85.3 Loss on early extinguishment of debt 2.4 2.4 4.8 Other, including net noncash loss on disposal or impairment of assets 0.2 0.2 0.4 Stock-based compensation expense 4.5 8.6 13.1 Adjusted EBITDA $ 192.1 $ 204.3 $ 396.4 Weighted average common shares outstanding: Basic 89.5 89.3 89.4 Diluted 99.4 99.4 99.4 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Refer to pages 43-45 for end notes.

35 Reconciliation of Net Income to Adjusted EBITDA(23) 2015 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net Income $ 59.0 $ 60.2 $ 67.8 $ 65.8 $ 252.8 Loss (income) from disc ops, net of tax, attributable to HealthSouth 0.3 1.6 (0.3) (0.7) 0.9 Net income attributable to noncontrolling interests (16.5) (17.3) (17.1) (18.8) (69.7) Income from continuing operations attributable to HealthSouth* 42.8 $ 0.44 44.5 $ 0.47 50.4 $ 0.52 46.3 $ 0.48 184.0 $ 1.92 Gov’t, class action, and related settlements 8.0 — — (0.5) 7.5 Pro fees - acct, tax, and legal 2.2 0.1 0.4 0.3 3.0 Provision for income tax expense 30.3 32.2 35.9 43.5 141.9 Interest expense and amortization of debt discounts and fees 31.8 30.9 35.6 44.6 142.9 Depreciation and amortization 31.9 32.7 33.7 41.4 139.7 Loss on early extinguishment of debt 1.2 18.8 — 2.4 22.4 Other, including net noncash (gain) loss on disposal or impairment of assets (1.5) 0.8 0.9 2.4 2.6 Stock-based compensation expense 9.4 6.2 6.2 4.4 26.2 Transaction costs — 3.3 2.3 6.7 12.3 Adjusted EBITDA $ 156.1 $ 169.5 $ 165.4 $ 191.5 $ 682.5 Weighted average common shares outstanding: Basic 87.1 89.8 90.6 90.1 89.4 Diluted 101.1 101.5 101.5 100.6 101.0 * Per share amounts for each period presented are based on diluted weighted-average shares outstanding. Refer to pages 43-45 for end notes.

36 Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q2 6 Months Full Year (Millions) 2016 2015 2016 2015 2015 Net cash provided by operating activities $ 152.2 $ 102.9 $ 311.9 $ 204.9 $ 484.8 Provision for doubtful accounts (15.4) (10.9) (31.9) (22.5) (47.2) Professional fees—accounting, tax, and legal 1.7 0.1 1.9 2.3 3.0 Interest expense and amortization of debt discounts and fees 43.4 30.9 88.0 62.7 142.9 Equity in net income of nonconsolidated affiliates 2.4 2.3 4.8 3.9 8.7 Net income attributable to noncontrolling interests in continuing operations (18.6) (17.3) (37.3) (33.8) (69.7) Amortization of debt-related items (3.4) (3.0) (6.8) (6.3) (14.3) Distributions from nonconsolidated affiliates (1.3) (1.8) (3.0) (3.7) (7.7) Current portion of income tax expense 4.0 3.4 9.0 6.9 14.8 Change in assets and liabilities 36.9 45.2 55.2 101.2 147.1 Net premium paid on bond issuance/redemption 2.0 11.8 3.9 3.8 3.9 Cash used in operating activities of discontinued operations 0.3 0.2 0.5 0.3 0.7 Transaction costs — 3.3 — 3.3 12.3 Other 0.1 2.4 0.2 2.6 3.2 Adjusted EBITDA $ 204.3 $ 169.5 $ 396.4 $ 325.6 $ 682.5

37 Reconciliation of Segment Adjusted EBITDA to Income from Continuing Operations Before Income Tax Expense Three Months Ended Six Months Ended Year Ended June 30, June 30, December 31, 2016 2015 2016 2015 2015 (In Millions) Total segment Adjusted EBITDA $ 230.1 $ 189.5 $ 449.6 $ 370.8 $ 774.1 General and administrative expenses (34.4) (32.1) (66.3) (66.7) (133.3) Depreciation and amortization (42.9) (32.7) (85.3) (64.6) (139.7) (Loss) gain on disposal or impairment of assets (0.2) (0.8) (0.4) 0.7 (2.6) Government, class action, and related settlements — — — (8.0) (7.5) Professional fees - accounting, tax, and legal (1.7) (0.1) (1.9) (2.3) (3.0) Loss on early extinguishment of debt (2.4) (18.8) (4.8) (20.0) (22.4) Interest expense and amortization of debt discounts and fees (43.4) (30.9) (88.0) (62.7) (142.9) Net income attributable to noncontrolling interests 18.6 17.3 37.3 33.8 69.7 Gain related to SCA equity interest — 2.6 — 2.6 3.2 Income from continuing operations before income tax expense $ 123.7 $ 94.0 $ 240.2 $ 183.6 $ 395.6

38 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow(6) Q2 6 Months Full Year ($millions) 2016 2015 2016 2015 2015 Net cash provided by operating activities $ 152.2 $ 102.9 $ 311.9 $ 204.9 $ 484.8 Impact of discontinued operations 0.3 0.2 0.5 0.3 0.7 Net cash provided by operating activities of continuing operations 152.5 103.1 312.4 205.2 485.5 Capital expenditures for maintenance (22.9) (18.2) (40.6) (36.5) (83.1) Dividends paid on convertible perpetual preferred stock(11) — (1.5) — (3.1) (3.1) Distributions paid to noncontrolling interests of consolidated affiliates (18.0) (13.0) (33.6) (26.2) (54.4) Items non-indicative of ongoing operations: Cash paid for professional fees - accounting, tax, and legal 1.7 2.7 1.9 3.4 4.1 Encompass transaction costs and related assumed liabilities — — 0.5 17.7 17.9 Reliant and CareSouth transaction costs — 1.6 0.3 1.6 10.4 Net premium on bond issuance/repayment 2.0 11.8 3.9 3.8 4.0 Cash paid for government, class action, and related settlements — 8.0 — 8.0 7.7 Adjusted free cash flow $ 115.3 $ 94.5 $ 244.8 $ 173.9 $ 389.0 Cash dividends on common stock $ 20.6 $ 18.5 $ 41.9 $ 37.1 $ 77.2 Refer to pages 43-45 for end notes.

39 For the Three Months Ended June 30, 2016 Adjustments As Reported Professional Fees - Accounting, Tax, and Legal Mark-to- Market Adjustment for Stock Appreciation Rights Loss on Early Extinguishment of Debt Sale of Hospital As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 204.3 $ — $ — $ — $ — $ 204.3 Depreciation and amortization (42.9) — — — — (42.9) Professional fees - accounting, tax, and legal (1.7) 1.7 — — — — Loss on early extinguishment of debt (2.4) — — 2.4 — — Interest expense and amortization of debt discounts and fees (43.4) — — — — (43.4) Stock-based compensation (8.6) — 2.8 — — (5.8) Loss on disposal or impairment of assets (0.2) — — — (0.9) (1.1) Income from continuing operations before income tax expense 105.1 1.7 2.8 2.4 (0.9) 111.1 Provision for income tax expense (42.4) (0.7) (1.1) (1.0) 0.4 (44.8) Income from continuing operations attributable to HealthSouth $ 62.7 $ 1.0 $ 1.7 $ 1.4 $ (0.5) $ 66.3 Add: Interest on convertible debt, net of tax 2.4 2.4 Numerator for diluted earnings per share $ 65.1 $ 68.7 Diluted earnings per share from continuing operations* $ 0.65 $ 0.01 $ 0.02 $ 0.01 (0.01) $ 0.69 Diluted shares used in calculation 99.4 Adjusted EPS(4) - Q2 2016 * Adjusted EPS may not sum across due to rounding. Reconciliations to GAAP provided on pages 34-42; Refer to pages 43-45 for end notes.

40 For the Three Months Ended June 30, 2015 Adjustments As Reported Professional Fees - Accounting, Tax, and Legal Transaction Costs Loss on Early Extinguishment of Debt As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 169.5 $ — $ — $ — $ 169.5 Depreciation and amortization (32.7) — — — (32.7) Professional fees - accounting, tax, and legal (0.1) 0.1 — — — Loss on early extinguishment of debt (18.8) — — 18.8 — Interest expense and amortization of debt discounts and fees (30.9) — — — (30.9) Stock-based compensation (6.2) — — — (6.2) Loss on disposal or impairment of assets (0.8) — — — (0.8) Transaction costs (3.3) — 3.3 — — Income from continuing operations before income tax expense 76.7 0.1 3.3 18.8 98.9 Provision for income tax expense (32.2) — (1.3) (7.5) (41.0) Income from continuing operations attributable to HealthSouth $ 44.5 $ 0.1 $ 2.0 $ 11.3 $ 57.9 Add: Interest on convertible debt, net of tax 2.3 2.3 Numerator for diluted earnings per share $ 46.8 $ 60.2 Diluted earnings per share from continuing operations* $ 0.47 $ — $ 0.02 $ 0.11 $ 0.59 Diluted shares used in calculation 101.5 Adjusted EPS(4) - Q2 2015 * Adjusted EPS may not sum across due to rounding. Reconciliations to GAAP provided on pages 34-42; Refer to pages 43-45 for end notes.

41 For the Six Months Ended June 30, 2016 Adjustments As Reported Professional Fees - Accounting, Tax, and Legal Mark-to- Market Adjustment for Stock Appreciation Rights Loss on Early Extinguishment of Debt Sale of Hospital As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 396.4 $ — $ — $ — $ — $ 396.4 Depreciation and amortization (85.3) — — — — (85.3) Professional fees - accounting, tax, and legal (1.9) 1.9 — — — — Loss on early extinguishment of debt (4.8) — — 4.8 — — Interest expense and amortization of debt discounts and fees (88.0) — — — — (88.0) Stock-based compensation (13.1) — 0.5 — — (12.6) Loss on disposal or impairment of assets (0.4) — — — (0.9) (1.3) Income from continuing operations before income tax expense 202.9 1.9 0.5 4.8 (0.9) 209.2 Provision for income tax expense (82.1) (0.8) (0.2) (1.9) 0.4 (84.6) Income from continuing operations attributable to HealthSouth $ 120.8 $ 1.1 $ 0.3 $ 2.9 $ (0.5) $ 124.6 Add: Interest on convertible debt, net of tax 4.8 4.8 Numerator for diluted earnings per share $ 125.6 $ 129.4 Diluted earnings per share from continuing operations* $ 1.26 $ 0.01 $ — $ 0.03 $ (0.01) $ 1.30 Diluted shares used in calculation 99.4 Adjusted EPS(4) - YTD 2016 * Adjusted EPS may not sum across due to rounding. Reconciliations to GAAP provided on pages 34-42; Refer to pages 43-45 for end notes.

42 For the Six Months Ended June 30, 2015 As Reported Government, Class Action, and Related Settlements Professional Fees - Accounting, Tax, and Legal Transaction Costs Loss on Early Extinguishment of Debt As Adjusted (In Millions, Except Per Share Amounts) Adjusted EBITDA $ 325.6 $ — $ — $ — $ — $ 325.6 Depreciation and amortization (64.6) — — — — (64.6) Government, class action, and related settlements (8.0) 8.0 — — — — Professional fees - accounting, tax, and legal (2.3) — 2.3 — — — Loss on early extinguishment of debt (20.0) — — — 20.0 — Interest expense and amortization of debt discounts and fees (62.7) — — — — (62.7) Stock-based compensation (15.6) — — — — (15.6) Gain on disposal or impairment of assets 0.7 — — — — 0.7 Transaction costs (3.3) — — 3.3 — — Income from continuing operations before income tax expense 149.8 8.0 2.3 3.3 20.0 183.4 Provision for income tax expense (62.5) (3.2) (0.9) (1.3) (8.0) (75.9) Income from continuing operations attributable to HealthSouth $ 87.3 $ 4.8 $ 1.4 $ 2.0 $ 12.0 $ 107.5 Add: Interest on convertible debt, net of tax 4.6 4.6 Numerator for diluted earnings per share $ 91.9 $ 112.1 Diluted earnings per share from continuing operations* $ 0.91 $ 0.05 $ 0.01 $ 0.02 $ 0.12 $ 1.11 Diluted shares used in calculation 101.3 Adjusted EPS(4) - YTD 2015 * Adjusted EPS may not sum across due to rounding. Reconciliations to GAAP provided on pages 34-42; Refer to pages 43-45 for end notes.

43 End Notes (1) CMS periodically retroactively updates Supplemental Security Income (“SSI”) ratios that are used to determine the adjustments to Medicare payment rate for low-income patients. In June 2015, CMS updated ratios for fiscal year 2013, and the Company retroactively recorded adjustments to full-year 2013, full-year 2014, and year-to-date 2015. As a result, the Company’s net operating revenues were negatively impacted by ~$5 million. (2) Current income tax expense was $4.0 million and $3.4 million for Q2 2016 and Q2 2015, respectively. Current income tax expense was $9.0 million and $6.9 million for the six months ended June 30, 2016 and 2015, respectively. (3) The interest and amortization related to the convertible senior subordinated notes must be added to income from continuing operations when calculating diluted earnings per share because the debt is assumed to have been converted and the applicable shares are included in the diluted share count. (4) HealthSouth is providing adjusted earnings per share from continuing operations attributable to HealthSouth (“adjusted earnings per share”), which is a non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing performance to prior periods given that it excludes the impact of government, class action, and related settlements, professional fees - accounting, tax, and legal, mark-to-market adjustments for stock appreciation rights, gains or losses related to hedging instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims), items related to corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operations. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company's ongoing operations. Accordingly, they can complicate comparisons of the Company's results of operations across periods and comparisons of the Company's results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies. (5) In connection with the Encompass acquisition, the Company granted stock appreciation rights based on the common stock of HealthSouth Home Health Holdings, Inc. to certain members of Encompass management. The fair value of Holdings’ common stock is determined using the product of the trailing 12-month specified performance measure for Holdings and a specified median market price multiple based on a basket of public home health companies. The fair value of these stock appreciation rights will vary from period to period based on Encompass’ performance and the change in the multiple of the basket of public home health companies. (6) Definition of adjusted free cash flow is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, dividends paid on preferred stock, distributions to noncontrolling interests, and nonrecurring items. Common stock dividends are not included in the calculation of adjusted free cash flow. (7) The timing of payroll-related liabilities that impacted working capital in 2016 related primarily to pay cycle differences in the inpatient rehabilitation segment and a year-over-year decrease in payroll tax withholdings related to the vesting of employee restricted stock awards. (8) The Medicare Access and CHIP Reauthorization Act of 2015 mandated a market basket update of +1.0% in 2018 for post-acute providers including rehabilitation hospitals as well as home health and hospice agencies. (9) The Company estimates the expected impact of each rule utilizing, among other things, the acuity of its patients over the 8-month (home health segment) to 12-month (inpatient rehabilitation segment) period prior to each rule’s release and incorporates other adjustments included in each rule. These estimates are prior to the impact of sequestration. (10) The Budget Control Act of 2011 included a reduction of up to 2% to Medicare payments for all providers that began on April 1, 2013 (as modified by H.R. 8). The reduction was made from whatever level of payment would otherwise have been provided under Medicare law and regulation.

44 End Notes, con’t. (11) In March 2006, the Company completed the sale 400,000 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. In Q4 2013, the Company exchanged $320 million of newly issued 2.0% Convertible Senior Subordinated Notes due 2043 for 257,110 shares of its outstanding preferred stock. In April 2015, the Company exercised its rights to force conversion of all outstanding shares of its 6.5% Series A Convertible Perpetual Preferred Stock. On the conversion date, each outstanding share of preferred stock was converted into 33.9905 shares of common stock, resulting in the issuance of 3,271,415 shares of common stock. (12) On July 16, 2015, the board of directors approved a $0.02 per share, or 9.5%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.23 per common share. On July 21, 2016, the board of directors approved a $0.01 per share, or 4.3%, increase to the quarterly cash dividend on the Company’s common stock, bringing the quarterly cash dividend to $0.24 per common share. (13) HealthSouth acquired an additional 30% equity interest in Fairlawn Rehabilitation Hospital in Worcester, MA from its joint venture partner. This transaction increased HealthSouth’s ownership interest from 50% to 80% and resulted in a change in accounting for this hospital from the equity method to a consolidated entity effective June 1, 2014. (14) In Q3 2012, HealthSouth amended the joint venture agreement related to St. Vincent Rehabilitation Hospital in Sherwood, AR which resulted in a change in accounting for this hospital from the equity method to a consolidated entity. (15) Data provided by Uniform Data System for Medical Rehabilitation, a division of UB Foundation Activities, Inc., a data gathering and analysis organization for the rehabilitation industry; represents ~70% of industry, including HealthSouth sites (16) Represents discharges from HealthSouth’s 120 consolidated hospitals in Q2 2016; 121 consolidated hospitals in Q1 2016; 120 consolidated hospitals in Q4 2015; 108 consolidated hospitals in Q3 2015 and Q2 2015; and 106 consolidated hospitals in Q1 2015 (17) Excludes approximately 420 full-time equivalents in the 2016 periods and approximately 400 full-time equivalents in the 2015 periods presented who are considered part of corporate overhead with their salaries and benefits included in general and administrative expenses in the Company’s consolidated statements of operations. Full-time equivalents included in the table represent HealthSouth employees who participate in or support the operations of the Company’s hospitals. (18) 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. (19) Represents home health admissions from Encompass’ 187 consolidated locations in Q2 2016; 184 consolidated locations in Q1 2016 and Q4 2015; 141 consolidated locations in Q3 2015; 139 consolidated locations in Q2 2015; and 143 consolidated locations in Q1 2015 (20) Represents hospice admissions from Encompass’ 29 locations in Q2 2016; 27 locations in Q1 2016 and Q4 2015; 23 locations in Q3 2015; and 21 locations in Q2 2015 and Q1 2015. (21) In November 2013, the Company closed separate, privately negotiated exchanges in which it issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock. The Company recorded ~$249 million as debt and ~$71 million as equity. The convertible notes are convertible, at the option of the holders, at any time on or prior to the close of business on the business day immediately preceding December 1, 2043 into shares of the Company’s common stock and is subject to customary antidilution adjustments. The Company has the right to redeem the convertible notes before December 1, 2018 if the volume weighted-average price of the Company’s common stock is at least 120% of the conversion price ($45.70) of the convertible notes for a specified period. On or after December 1, 2018, the Company may, at its option, redeem all or any part of the convertible notes. In either case, the redemption price will be equal to 100% of the principal amount of the convertible notes to be redeemed, plus accrued and unpaid interest.

45 End Notes, con’t. (22) The agreement to settle the Company’s class action securities litigation received final court approval in January 2007. The 5.0 million shares of common stock and warrants to purchase ~8.2 million shares of common stock at a strike price of $41.40 (expire January 17, 2017) related to this settlement were issued on September 30, 2009. The 5.0 million common shares are included in the basic outstanding shares. The warrants were not included in the diluted share count prior to 2015 because the strike price had historically been above the market price. In Q2 2016, YTD 2016, full-year 2014, and full- year 2013, zero shares related to the warrants were included in the diluted share count due to antidilution based on the stock price. In Q2 2015, YTD 2015, and full-year 2015, 622,224, 470,136, and 80,814 shares, respectively, related to the warrants were included in the diluted share count using the treasury stock method. (23) 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.