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): August 3, 2010

REHABCARE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-14655	51-0265872
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer
of incorporation)		Identification No.)

7733 Forsyth Boulevard
Suite 2300
St. Louis, Missouri	63105
(Address of principal executive offices)	(Zip Code)

(800) 677-1238

(Company’s telephone number, including area code)

Not applicable

(Former name or former address if changed since last report)

	Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the  Exchange Act (17 CFR 240.14d-2(b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the  Exchange Act (17 CFR 240.13e-4(c))

Item 2.02		Results of Operations and Financial Condition
		The information in Exhibit 99.1 is incorporated herein by reference.
Item 7.01		Regulation FD Disclosure
		The information in Exhibit 99.2 is incorporated herein by reference.
Item 9.01		Financial Statements and Exhibits
(d)		Exhibits
		The following exhibits are furnished pursuant to Item 2.02, 7.01 and 9.01 hereof and should not be  deemed to be “filed” under the Securities Exchange Act of 1934:
	99.1	Press release dated August 3, 2010, announcing our second quarter revenues and  results of operations.
	99.2	The script for a conference call held by the registrant on August 4, 2010

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.

Dated: August 4, 2010

REHABCARE GROUP, INC.

By: /s/	Jay W. Shreiner
	Jay W. Shreiner
	Executive Vice President and
	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description
99.1	Press release dated August 3, 2010, announcing our second quarter revenues and results of operations.
99.2	The script for a conference call held by the registrant on August 4, 2010

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Tuesday, August 3, 2010

REHABCARE REPORTS SECOND QUARTER 2010 RESULTS

·   Consolidated operating revenues increased 62.8% and net earnings per diluted share increased 55.3% over the prior year quarter

·   Legacy hospitals reached breakeven operating earnings run rate at the end of the quarter; on track for breakeven operating earnings for 2010

·   Soft acute care volumes in key markets resulted in a sequential decline in Triumph’s EBITDA margin from 17.7% to 16.7%; Company expects to achieve historical EBITDA margins by early 2011

·   Contract services divisions continued to report strong earnings results

ST. LOUIS, MO, August 3, 2010--RehabCare Group, Inc. (NYSE:RHB) today reported financial results for the quarter and six months

ended June 30, 2010.  Comparative results for the quarter and six months follow.

	Second			First		Second			Six Months Ended
	Quarter			Quarter		Quarter			June 30,
Amounts in millions, except per share data	2010			2010		2009				2010			2009
Consolidated Operating Revenues (a)	$	334.0		$	327.4	$	205.2		$	661.4		$	406.7
Consolidated Operating Earnings (a)		31.3			32.5		12.8			63.8			27.1
Consolidated Net Earnings from Continuing Operations (a), (b)		15.2			14.8		7.4			30.0			15.8
Loss from Discontinued Operations, Net of Tax (c)		—			—		(0.9	)		—			(0.8	)
Consolidated Net Earnings (a), (b)		15.2			14.8		6.5			30.0			15.0
Net (Earnings) Loss Attributable to Noncontrolling Interests		(0.5	)		0.2		0.4			(0.3	)		0.5
Net Earnings Attributable to RehabCare (a), (b), (c)		14.7			15.0		6.9			29.7			15.5
Diluted Earnings per Share Attributable to RehabCare:
Earnings from Continuing Operations, Net of Tax (a), (b)		0.59			0.61		0.43			1.20			0.91
Net Earnings (a), (b), (c)		0.59			0.61		0.38			1.20			0.87
SRS Operating Revenues		130.9			126.4		123.8			257.2			246.9
SRS EBITDA		12.5			11.7		10.7			24.1			22.8
SRS Operating Earnings		11.1			10.3		9.1			21.5			19.6
HRS Inpatient Operating Revenues		31.8			31.1		32.9			62.9			64.7
HRS Outpatient Operating Revenues		13.0			12.1		12.2			25.1			23.5
HRS Operating Revenues		44.8			43.2		45.1			88.0			88.2
HRS EBITDA		8.4			7.5		8.3			15.9			15.2
HRS Operating Earnings		7.9			6.9		7.7			14.8			14.0
Hospital Operating Revenues (a)		158.4			157.8		36.3			316.2			71.6
Hospital EBITDA (a)		18.0			20.6		(2.2	)		38.7			(3.0	)
Hospital Operating Earnings (Loss) (a)		12.3			15.2		(3.8	)		27.5			(6.1	)

(a)   During the 2010 second quarter, the Company recorded a $1.7 million unfavorable pretax adjustment for estimates of additional amounts due on 2007 and 2008 cost reports for one of its inpatient rehabilitation facilities. The after tax impact of this adjustment was approximately $1.0 million, or $0.04 per diluted share (see table on page 9).

REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 2

(b)   During the 2010 second quarter, the Company recognized a $0.8 million, or $0.03 per diluted share, income tax benefit for the combined impact of the reversal of a contingency reserve due to a favorable ruling from the Internal Revenue Service and tax credits identified during the quarter (see table on page 9).

(c)   The $0.9 million after-tax loss from discontinued operations in the second quarter of 2009 included a $0.7 million loss on the sale of the Company’s Phase 2 Consulting business on June 1, 2009 and a $0.2 million after-tax loss from Phase 2’s discontinued operating activities.

Management Comments

“We continued to see strong year-over-year results in the second quarter.  Notwithstanding all of the prospective changes in the regulatory landscape, as well as our integration of Triumph, our divisions are performing well,” said John H. Short, Ph.D., RehabCare President and Chief Executive Officer.

“As expected, our 13 legacy hospitals reached a breakeven operating earnings run rate at the end of the quarter.  Our legacy long-term acute care hospitals are experiencing significant improvements under Triumph’s operational model and leadership, including our Dallas hospital, which was accretive in the quarter.  Triumph’s quarterly results primarily were impacted by continued soft acute care volumes in key markets; however, we are aggressively working to grow census and expect to achieve historical EBITDA (earnings before interest, taxes, depreciation and amortization) margins by the beginning of 2011 for the Triumph portfolio,” he said.

Dr. Short continued, “Our Skilled Nursing Rehabilitation Services (SRS) division delivered another strong quarterly earnings performance, while preparing for a host of regulatory changes.  In addition to restrictions on concurrent therapy and new RUG IV payments that go into effect October 1, we also are facing a proposed 50% Multiple Procedure Payment Reduction (MPPR) for Part B therapy rates beginning in 2011.  We are working with other patient advocates in encouraging the Centers for Medicare and Medicaid Services (CMS) to rescind their proposal due to its adverse impact on patient access to essential therapy services.  At the same time, we are developing mitigation strategies should it be implemented.  Our concerns with MPPR are outlined in our position paper, which we have posted on o ur website at http://www.rehabcare.com/about/news/index.html.  Maintaining our SRS operating earnings margin outlook of 7% to 8% for the full year 2010, we are expecting a margin in the range of 5.5% to 6.5% in the fourth quarter.

“Finally, our Hospital Rehabilitation Services division is achieving high levels of profitability and gaining traction with business development strategies that were put in place earlier this year, signing four new contracts in the second quarter.”

Financial Overview of Second Quarter

Consolidated operating revenues for the second quarter of 2010 were $334.0 million, which included $110.8 million generated by Triumph, a 62.8% increase compared to $205.2 million in the 2009 second quarter.

Consolidated net earnings from continuing operations attributable to RehabCare were $14.7 million, or $0.59 per diluted share, in the second quarter of 2010 compared to $7.8 million, or $0.43 per diluted share, in the prior year quarter. The second quarter of 2010 was impacted by a $1.7 million unfavorable pretax adjustmentfor estimated prior year cost report settlements at one inpatient rehabilitation facility (IRF)and a$0.8 million income tax benefit, which resulted in a net negative after-tax impact on diluted earnings per share of $0.01 (see table on page 9).

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 3

Operating revenues in the Skilled Nursing Rehabilitation Services (SRS) division increased 5.7% from $123.8 million in the second quarter of 2009 to $130.9 million in the second quarter of 2010, driven by a 5.5% increase in the average number of contract therapy programs operated.  Contract therapy same store revenues increased 3.4%.

On June 30, 2010, SRS operated in 1,115 locations compared to 1,125 locations at the end of the first quarter of 2010 and 1,065 locations at the end of the second quarter of 2009.  With a backlog of 44 signed but unopened contracts at the end of the second quarter, the Company expects to resume net unit growth in the third quarter.

The SRS division’s operating earnings were $11.1 million, or 8.5% of revenue, compared to $9.1 million, or 7.4% of revenue, in the second quarter of 2009.

On July 16, CMS released an update to the skilled nursing facility (SNF) prospective payment system, which provides for a net increase of 1.7% in Rate Year (RY) 2011.  The Company does not expect this update to alter its outlook.  The SNF rule also contains the new RUG IV payment rates, which the Company does not believe will significantly impact its patient volumes.

The Hospital Rehabilitation Services (HRS) division’s 2010 second quarter operating revenues decreased 0.8% to $44.7 million from $45.1 million in the second quarter of 2009.  Inpatient operating revenues declined 3.6% as a result of a 6.1% decline in the average number of inpatient programs.  IRF same store revenues and discharges increased 2.3% and 0.7%, respectively, over the prior year quarter.  Outpatient operating revenues increased 6.7% in the 2010 second quarter despite a 12.1% decline in the average number of outpatient programs.  This was driven by a 21.4% improvement in average revenue per program inclusive of 7.0% same store growth in outpatient revenues.

At June 30, 2010, the division operated 106 IRF programs compared to 103 at the end of the first quarter and 111 a year ago. The division had four IRF openings, one IRF closing, one outpatient unit opening and signed contracts for three IRFs during the second quarter.  At quarter end, the number of signed but unopened IRF contracts was two, compared to three at the end of the first quarter.  A net one to two new IRF programs are expected for the second half of 2010.

HRS 2010 second quarter operating earnings were $7.9 million, or 17.6% of revenue, compared to operating earnings of $7.7 million, or 17.0% of revenue, for the 2009 second quarter.  For the full year 2010, the Company is raising its outlook for operating earnings margins from a range of 15% to 17% to a range of 16% to 18%.

Operating revenues in the Hospital division for the second quarter of 2010 increased $0.7 million, or 0.4%, sequentially to $158.4 million.  Same store revenues decreased 3.4% on a sequential basis, impacted by soft acute care volumes in key markets and an unfavorable $1.7 million adjustment for estimated prior year cost report settlements at one IRF.

The legacy hospitals generated an operating loss of $2.4 million in the 2010 second quarter compared to an operating loss of $1.0 million in the 2010 first quarter.  The second quarter operating loss reflected the $1.7 million estimated adjustment referenced above and included $0.4 million in start-up losses for Greater Peoria Specialty Hospital.

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 4

Triumph HealthCare generated revenues of $110.8 million, operating earnings of $14.6 million and EBITDA of $18.5 million, or 16.7% of revenue, during the second quarter of 2010.  For the full year, the Company expects Triumph to achieve an EBITDA margin of around 17%, with a return to historical EBITDA margins beginning in 2011.  Expecting continued soft census in the second half of the year, compounded by long-term acute care hospital (LTACH) Medicare rate reductions, the Company is adjusting its 2010 Hospital outlook to a revenue range of $640 to $665 million, down from $650 to $675 million, and an EBITDA range of $85 to $95 million, down from $90 to $100 million.

At the end of the quarter, the Hospital division operated a total of 35 hospitals, including 29 LTACHs and six IRFs.

The final RY 2011 rule for LTACHs, published on July 30, will result in an estimated negative 1.0% adjustment for the Company’s LTACHs.  The CMS self-executing rule for IRFs, released on July 16, will increase payments by an estimated net 2.4% for the Company’s owned IRFs.  These adjustments are included in the Company’s revised 2010 outlook.

Balance Sheet and Liquidity

At June 30, 2010, the Company had $18.0 million in cash and cash equivalents and $452.3 million in outstanding debt excluding unamortized original issue discounts.  Days sales outstanding (DSO) increased to 62.1 days from 61.8 days at March 31, 2010.

For the six months ended June 30, 2010, the Company generated cash from operations of $25.8 million and expended $15.7 million for capital expenditures, principally related to the start-up of Triumph Hospital-The Heights, companywide information systems and hospital facility maintenance capital.

Outlook

The Company does not provide revenue and earnings per share guidance, but provides the following outlook for the total year 2010:

·   The Skilled Nursing Rehabilitation Services division expects 7% to 8% operating earnings margins for the full year 2010, which will be driven by low to mid-single digit year-over-year same store revenue growth and net unit growth of 50 to 75 units.  This reflects the estimated impact of new concurrent therapy rules, the rollout of new technologies, pricing pressures and wage rate increases during the year.  Given these pressures, the division anticipates an operating earnings margin of 5.5% to 6.5% in the fourth quarter.

·   The Hospital Rehabilitation Services division expects 16% to 18% operating earnings margins and 2% to 4% year-over-year growth in IRF same store discharges for the full year 2010.  A net one to two new IRF programs are expected for the second half of 2010.

·   The Hospital division expects total year revenue of $640 to $665 million and EBITDA of $85 to $95 million.  As previously stated, the Company expects to achieve breakeven operating earnings in its 13 legacy hospitals for the full year 2010.

·   The effective tax rate, after consideration of noncontrolling interests, is anticipated to be 38.25% for the remainder of the year.

·   Net income attributable to noncontrolling interests is expected to approximate $2.5 million for the total year 2010.

·   The Company expects strong operating cash flow with DSO between 60 and 63 days.

·   Capital expenditures are anticipated to be $32 million in 2010, consisting of $12.5 million of information systems investments and $19.5 million in expansion projects and maintenance.

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 5

Conference Call Information

RehabCare will host a conference call on August 4, 2010, beginning at 10:00 AM Eastern time.  Listeners may access the call by dialing (800) 640-9765, confirmation number 27202042, or in a listen-only mode through the Company’s website at http://www.rehabcare.com/about/investors/webcast.html.  A replay of the call will be available beginning at approximately 3:00 PM Eastern Time on August 4 by dialing (877) 213-9653, confirmation number 27202042.  An online archive of the conference call will remain on the Company’s website through September 3, 2010.

About RehabCare Group

Established in 1982 and headquartered in St. Louis, MO, RehabCare (www.rehabcare.com) is a leading provider of post-acute care, owning and operating 35 long-term acute care and rehabilitation hospitals and providing program management services in partnership with over 1,260 hospitals and skilled nursing facilities in 42 states.   RehabCare is included in the Russell 2000 and Standard and Poor’s Small Cap 600 Indices.

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the Company’s current expectations and could be affected by numerous factors, risks and uncertainties discussed in the Company’s filings with the Securities and Exchange Commission, including its most recent report on Form 10-K, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. Do not rely on forward-looking statements as the Company cannot predict or control many factors that affect its ability to achieve the results estimated.  The Company makes no promise to update any forward- looking statements because of changes in underlying factors, new information, future events or otherwise.

This press release contains non-GAAP financial measures as such term is defined in Regulation G under the rules of the Securities and Exchange Commission. While the Company believes these non-GAAP financial measures are useful in evaluating the Company, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Further, these non-GAAP financial measures may differ from similarly titled measures presented by other companies.  The Company has included reconciliations of these non-GAAP measures to the most directly comparable GAAP measure in the tables of this release.

CONTACT: RehabCare Group, Inc.

Financial: Jay W. Shreiner, Chief Financial Officer

(314) 659-2189

Press: Donna Lee, Office of the CEO

(314) 659-2287

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 6

I. Condensed Consolidated Statements of Earnings
(Unaudited; amounts in thousands, except per share data)
	Three Months Ended									Six Months Ended
	June 30,			Mar. 31,			June 30,			June 30,			June 30,
		2010			2010			2009			2010			2009
Operating revenues	$	334,033		$	327,361		$	205,164		$	661,394		$	406,695
Costs and expenses:
Operating		267,299			261,070			163,562			528,369			322,853
Selling, general and administrative		27,814			26,535			24,987			54,349			49,068
Depreciation and amortization		7,642			7,280			3,783			14,922			7,652
Total costs and expenses		302,755			294,885			192,332			597,640			379,573
Operating earnings		31,278			32,476			12,832			63,754			27,122
Interest income		28			18			4			46			19
Interest expense		(8,551	)		(8,500	)		(549	)		(17,051	)		(1,121	)
Other income (expense), net		(5	)		7			—			2			1
Equity in net income of affiliates		211			116			108			327			274
Earnings from continuing operations before income taxes		22,961			24,117			12,395			47,078			26,295
Income tax expense		7,744			9,288			4,965			17,032			10,468
Earnings from continuing operations		15,217			14,829			7,430			30,046			15,827
Loss from discontinued operations		—			—			(882	)		—			(831	)
Net earnings		15,217			14,829			6,548			30,046			14,996
Net (earnings) loss attributable to noncontrolling interests		(512	)		164			335			(348	)		547
Net earnings attributable to RehabCare	$	14,705		$	14,993		$	6,883		$	29,698		$	15,543
Amounts attributable to RehabCare:
Earnings from continuing operations	$	14,705		$	14,993		$	7,765		$	29,698		$	16,374
Loss from discontinued operations		—			—			(882	)		—			(831	)
Net earnings	$	14,705		$	14,993		$	6,883		$	29,698		$	15,543
Diluted EPS attributable to RehabCare:
Earnings from continuing operations	$	0.59		$	0.61		$	0.43		$	1.20		$	0.91
Loss from discontinued operations		—			—			(0.05	)		—			(0.04	)
Net earnings	$	0.59		$	0.61		$	0.38		$	1.20		$	0.87
Weighted average diluted shares		24,766			24,655			18,097			24,696			17,955

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 7

II. Condensed Consolidated Balance Sheets
(Amounts in thousands)
	Unaudited
	June 30,		December 31,
	2010		2009
Assets
Cash and cash equivalents	$	18,041	$	24,690
Accounts receivable, net		218,084		199,447
Deferred tax assets		20,092		21,249
Other current assets		25,592		19,530
Total current assets		281,809		264,916
Property and equipment, net		117,155		111,814
Goodwill		566,078		566,078
Intangible assets		131,151		135,406
Investment in unconsolidated affiliate		4,829		4,761
Other assets		25,765		27,005
	$	1,126,787	$	1,109,980
Liabilities & Equity
Current portion of long-term debt	$	13,565	$	7,507
Payables & accruals		142,826		144,113
Total current liabilities		156,391		151,620
Long-term debt, less current portion		430,479		447,760
Other non-current liabilities		52,826		50,980
Stockholders’ equity		467,995		437,338
Noncontrolling interests		19,096		22,282
	$	1,126,787	$	1,109,980

III. Condensed Consolidated Statements of Cash Flows
(Unaudited; amounts in thousands)
	Six Months Ended
	June 30,
	2010			2009
Net cash provided by operating activities	$	25,793		$	27,077
Net cash used in investing activities		(15,690	)		(6,866	)
Net cash used in financing activities		(16,752	)		(23,999	)
Net decrease in cash and cash equivalents		(6,649	)		(3,788	)
Cash and cash equivalents at beginning of period		24,690			27,373
Cash and cash equivalents at end of period	$	18,041		$	23,585
Supplemental information:
Additions to property and equipment	$	(15,658	)	$	(5,881	)

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 8

IV. Operating Statistics (Unaudited; dollars in thousands)
		Second			First			Second		Six Months Ended
		Quarter			Quarter			Quarter		June 30,
		2010			2010			2009			2010			2009
Skilled Nursing Rehabilitation Services
Operating revenues	$	130,851		$	126,352		$	123,787		$	257,203		$	246,935
Operating expenses		105,655			103,333			100,134			208,988			199,132
Selling, general and administrative		12,717			11,367			12,967			24,084			24,984
Depreciation and amortization		1,365			1,307			1,578			2,672			3,256
Operating earnings	$	11,114		$	10,345		$	9,108		$	21,459		$	19,563
Operating earnings margin		8.5	%		8.2	%		7.4	%		8.3	%		7.9	%
EBITDA	$	12,479		$	11,652		$	10,686		$	24,131		$	22,819
Average number of contract therapy locations		1,127			1,131			1,068			1,129			1,071
End of period number of contract therapy locations		1,115			1,125			1,065			1,115			1,065
Patient visits (in thousands)		2,080			2,020			2,017			4,100			4,022
Hospital Rehabilitation Services
Operating revenues
Inpatient Rehabilitation Facility (IRF)	$	29,609		$	29,016		$	31,257		$	58,625		$	61,275
Subacute		2,125			2,094			1,662			4,219			3,387
Total Inpatient	$	31,734		$	31,110		$	32,919		$	62,844		$	64,662
Outpatient		13,000			12,130			12,178			25,130			23,501
Total HRS	$	44,734		$	43,240		$	45,097		$	87,974		$	88,163
Operating expenses		31,856			31,155			31,007			63,011			61,641
Selling, general and administrative		4,445			4,627			5,806			9,072			11,296
Depreciation and amortization		556			537			624			1,093			1,270
Operating earnings	$	7,877		$	6,921		$	7,660		$	14,798		$	13,956
Operating earnings margin		17.6	%		16.0	%		17.0	%		16.8	%		15.8	%
EBITDA	$	8,433		$	7,458		$	8,284		$	15,891		$	15,226
Average number of programs
IRF		104			104			113			104			113
Subacute		10			10			9			10			9
Total Inpatient		114			114			122			114			122
Outpatient		32			31			36			31			36
Total HRS		146			145			158			145			158
End of period number of programs
IRF		106			103			111			106			111
Subacute		10			10			9			10			9
Total Inpatient		116			113			120			116			120
Outpatient		32			31			36			32			36
Total HRS		148			144			156			148			156
IRF discharges		10,376			10,007			11,359			20,383			22,358
Outpatient visits (in thousands)		279			262			328			541			639

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 9

IV. Operating Statistics Continued (Unaudited; dollars in thousands)
		Second			First			Second		Six Months Ended
		Quarter			Quarter			Quarter		June 30,
		2010			2010			2009			2010			2009
Hospitals
Operating revenues	$	158,448		$	157,769		$	36,280		$	316,217		$	71,597
Operating expenses		129,788			126,582			32,421			256,370			62,080
Selling, general and administrative		10,652			10,541			6,079			21,193			12,534
Depreciation and amortization		5,721			5,436			1,581			11,157			3,126
Operating earnings (loss)	$	12,287		$	15,210		$	(3,801	)	$	27,497		$	(6,143	)
Operating earnings margin		7.8	%		9.6	%		-10.5	%		8.7	%		-8.6	%
EBITDA	$	18,008		$	20,646		$	(2,220	)	$	38,654		$	(3,017	)
LTACHs
Number of hospitals – end of period		29			28			6			29			6
Available licensed beds – end of period		1,605			1,593			303			1,605			303
Admissions		3,522			3,563			521			7,085			1,037
Patient days		92,857			90,455			14,586			183,312			28,430
Average length of stay (Medicare days only)		26			27			28			26			27
Net inpatient revenue per patient day	$	1,514		$	1,518		$	1,181		$	1,516		$	1,214
Occupancy rate		64	%		63	%		66	%		63	%		65	%
Percent patient days - Medicare		72	%		73	%		76	%		73	%		75	%
IRFs
Number of hospitals – end of period		6			6			6			6			6
Available licensed beds – end of period		243			243			243			243			243
Admissions		1,157			1,232			1,238			2,389			2,448
Discharges		1,197			1,188			1,252			2,385			2,400
Average length of stay (Medicare days only)		12			13			12			13			12
Net inpatient revenue per discharge (a)	$	12,718		$	14,845		$	13,687		$	13,777		$	13,926
Occupancy rate		69	%		73	%		71	%		71	%		70	%
Percent patient days - Medicare		62	%		66	%		67	%		64	%		65	%
(a)  Excluding a $1.7 million unfavorable prior year cost report adjustment recorded during the second quarter of 2010 for one of the Company’s IRFs, net inpatient revenue per discharge for IRFs would have been $14,134 and $14,488 for the second quarter and first six months of 2010, respectively.

V. Charges/Credits Included in Statement of Earnings (Amounts in thousands, except per share data)
	Second Quarter 2010
	Pre-Tax Impact			After-Tax Impact		Diluted EPS
Unfavorable cost report adjustment		$	1,696	$	1,047	$	0.04
Favorable income tax adjustments			—		(842)		(0.03)
		$	1,696	$	205	$	0.01

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REHABCARE REPORTS SECOND QUARTER 2010 RESULTS  Page 10

VI. Operating Earnings and EBITDA Reconciliation
		Second			First			Second		Six Months Ended
		Quarter			Quarter			Quarter		June 30,
		2010			2010			2009			2010			2009
Net earnings	$	15,217		$	14,829		$	6,548		$	30,046		$	14,996
Income tax expense		7,744			9,288			4,965			17,032			10,468
Interest income		(28	)		(18	)		(4	)		(46	)		(19	)
Interest expense		8,551			8,500			549			17,051			1,121
Other (income) expense, net		5			(7	)		—			(2	)		(1	)
Equity in net income of affiliates		(211	)		(116	)		(108	)		(327	)		(274	)
Loss from discontinued operations		—			—			882			—			831
Operating earnings		31,278			32,476			12,832			63,754			27,122
Depreciation and amortization		7,642			7,280			3,783			14,922			7,652
Consolidated EBITDA	$	38,920		$	39,756		$	16,615		$	78,676		$	34,774
SRS operating earnings	$	11,114		$	10,345		$	9,108		$	21,459		$	19,563
SRS depreciation and amortization		1,365			1,307			1,578			2,672			3,256
SRS EBITDA	$	12,479		$	11,652		$	10,686		$	24,131		$	22,819
HRS operating earnings	$	7,877		$	6,921		$	7,660		$	14,798		$	13,956
HRS depreciation and amortization		556			537			624			1,093			1,270
HRS EBITDA	$	8,433		$	7,458		$	8,284		$	15,891		$	15,226
Hospital operating earnings (loss)	$	12,287		$	15,210		$	(3,801	)	$	27,497		$	(6,143	)
Hospital depreciation and amortization		5,721			5,436			1,581			11,157			3,126
Hospital EBITDA	$	18,008		$	20,646		$	(2,220	)	$	38,654		$	(3,017	)

-END-

EX-99.2

Exhibit 99.2

REHABCARE CONFERENCE CALL SCRIPT

August 4, 2010

INTRODUCTION BY CONFERENCE OPERATOR

Thank you for joining us today for RehabCare’s second quarter earnings conference call.  Speaking on the call today will be John Short, RehabCare President and CEO.  At this time, all participants are in a listen-only mode.  We will have a question-and-answer session toward the end of the conference call.  Please note this call is being recorded.  I would now like to turn the call over to Patti Williams, RehabCare General Counsel.

INTRODUCTION OF MANAGEMENT BY GENERAL COUNSEL

Thanks.  I want to remind everyone that this conference call contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the Company’s current expectations and could be affected by numerous factors, risks and uncertainties discussed in the Company’s filings with the Securities and Exchange Commission, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and current reports on Form 8-K. Do not rely on forward-looking statements. The Company cannot predict or control many factors affecting its ability to achieve the results estimated.  The Company makes no promise to update any forward-looking statements because of changes in underlying factors, new information, future events or otherwise.  I will now hand it over to Dr. Short.

JOHN SHORT

INTRODUCTION AND WELCOME

Thank you, Patti, and welcome everyone.  Joining me on the call this morning are the members of my executive management team.  After a few general remarks, I will open up the call for questions.  Financial details of the quarter, along with our outlook, are included in our press release.

In the second quarter, we continued to see dramatic year-over-year growth in revenue and earnings.

Under Triumph’s management, our legacy long-term acute care hospitals (LTACHs) are experiencing significant operational improvements, which is driving margin expansion.  Clinical quality metrics, such as readmission rates to acute care hospitals, also are improving.  At the end of the second quarter, our 13 legacy hospitals realized a breakeven operating earnings run rate and are expected to achieve breakeven operating earnings for 2010.  As expected, our Dallas LTACH was accretive for the quarter.

The percentage point decline in quarterly EBITDA margin for the Triumph portfolio primarily was the result of continued weak acute care volumes in key markets.  Expecting soft census to continue in the second half of the year, compounded by LTACH Medicare rate reductions, we are revising our outlook for the Hospital division in 2010.  We now expect an EBITDA range of 85 to 95 million dollars, down from our previous forecast of 90 to 100 million dollars.  We are aggressively working to grow census by adding clinical programs and services and enhancing our referral development process.  We also are implementing plans to reduce costs, especially in group purchasing, and expect Triumph to return to historical EBITDA margins beginning in 2011.

Meanwhile, our contract services businesses are performing at high levels of profitability.  Our Skilled Nursing Rehabilitation Services (SRS) division had an operating earnings margin of 8.5 percent in the second quarter, while preparing to mitigate reimbursement issues that continue to grow. Through our mitigation plan, we are reducing our percentage of patients being treated concurrently, in advance of changes to concurrent therapy rules that go into effect October 1.  We also are preparing for the third iteration of MDS and new RUG IV payment rates that start in October.  Our rollout of new technologies across the division, most of which will be completed by year end, is providing many of the tools that will be important to operating successfully under these changes.

Compounding the pressures on our SRS division is a proposed rule by the Centers for Medicare and Medicaid Services (CMS) that would reduce Medicare Part B therapy rates by about 10% beginning in 2011.  The Multiple Procedure Payment Reduction (MPPR) policy cuts reimbursement by an arbitrary 50% for subsequent procedures when multiple therapy services are delivered in the same day.  We are disappointed that CMS did not collaborate with the industry in proposing this change or analyze the negative impact on patient access.  In our position paper, which we have posted on our website at www.rehabcare.com, we point out that rates set in 2001 accounted for duplicative costs when delivering multiple therapy sessions.  We are working with o ur trade associations, patient advocacy groups and legislative team in Washington to challenge this rule, at the same time, developing mitigation strategies in the event it is implemented.

While maintaining our full year outlook for SRS, we believe the myriad of regulatory changes, some disruption from our technology rollout, along with continued wage rate increases and pricing pressures will soften fourth quarter earnings.  Our outlook for the fourth quarter is an operating earnings margin in the range of 5.5 to 6.5 percent.

Our Hospital Rehabilitation Services (HRS) division delivered another impressive earnings performance in the second quarter.  Despite a decline in the average number of programs, same store revenue improved in both inpatient and outpatient services and the division achieved a 17.6 percent operating earnings margin.  Our outpatient segment also had a 21.4 percent improvement in average revenue per program. In recognition of continued strong results, we are raising our outlook for full year operating earnings margin from 15 to 17 percent to a range of 16 to 18 percent.

Following several months of development, we have begun a series of upgrades to our HRS inpatient operating system, which will provide important new compliance, referral management and benchmarking capabilities.  By year end, we also will begin rolling out the iPod Touch and point-of-service applications to therapists in our inpatient rehabilitation facilities.  These initiatives not only have significant operational benefits, such as improved productivity, but move us closer to a clinically integrated continuum of post-acute care.  They also create greater client value.

Our enhanced client retention efforts and targeted strategies to capture new business in HRS, including aligning our business development and operations functions, resulted in the signing of four new contracts in the second quarter.  We expect to grow our IRF unit count by a net one to two new units in the second half of the year.

Considering the changing dynamics, both within the industry and our organization as we work to integrate Triumph, I am very pleased with the performance of each of our divisions.  Our adaptability has been and will continue to be one of our greatest strengths.

With that, I would like to have our operator open the call for questions.

To be read following Questions and Answers –

As a reminder, a replay of this call will be available beginning at 3 pm Eastern time today.  An online archive also is available on our website, www.rehabcare.com.