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HealthSouth Reports Results for Fourth Quarter Ended December 31, 2007
Date:2/25/2008

ase in our Medicare reimbursement that was effective October 1, 2007 and a 0.9% increase in discharges quarter over quarter.

During the fourth quarter of 2007, nine of our hospitals operated under the 65% compliance threshold of the 75% Rule. Also during the fourth quarter of 2007, the majority of our hospitals began restricting admissions as they prepared to move to the 65% compliance threshold on January 1, 2008. Despite this challenging environment for these hospitals, total discharges increased by 0.9% compared to the fourth quarter of 2006 and showed a 1.9% sequential improvement from the third quarter of 2007.

Outpatient visits to our outpatient satellites of our inpatient rehabilitation hospitals declined 8.5% in the fourth quarter of 2007 compared to the fourth quarter of 2006 due primarily to the closing of 21 underperforming satellites throughout 2007. During the same quarterly periods, outpatient net operating revenues were down only 1.6% due to strong unit pricing.

Total Operating Expenses

Total operating expenses decreased by 1.5% in the fourth quarter of 2007 compared to the fourth quarter of 2006. Our goal was to manage our overall cost structure in a strategic manner, allowing us to invest in our most valuable resource - our employees.
-- The combined categories of supplies, occupancy costs, and other

operating expenses decreased from 21.3% of net operating revenues in

the fourth quarter of 2006 to 19.9% of net operating revenues in the

fourth quarter of 2007.

-- Professional fees were down significantly as we concluded the vast

majority of our various restructuring efforts.

-- The provision for doubtful accounts improved to 1.8% of net operating

revenues for the quarter, compared to 4.7% for the same period last

year. These improvements are reflective of the benefits we have seen

with the new billing and collections software we installed
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SOURCE HealthSouth Corporation
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