1035688--3/17/2010--SELECT_MEDICAL_HOLDINGS

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Expiration of the moratorium imposed on certain federal regulations otherwise applicable to long term acute care hospitals operated as hospitals within hospitals or as satellites will have an adverse effect on our future net operating revenues and profitability. Expiration of the moratorium imposed on certain federal regulations otherwise applicable to long term acute care hospitals operated as free-standing or grandfathered hospitals within hospitals or grandfathered satellites will have an adverse effect on our future net operating revenues and profitability. The moratorium on the Medicare certification of new long term care hospitals and beds in existing long term care hospitals will limit our ability to increase long term acute care hospital bed capacity, expand into new areas or increase services in existing areas we serve. Government implementation of recent changes to Medicare s method of reimbursing our long term acute care hospitals will reduce our future net operating revenues and profitability. If our long term acute care hospitals fail to maintain their certifications as long term acute care hospitals or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our net operating revenues and profitability may decline. Implementation of additional patient or facility criteria for LTCHs that limit the population of patients eligible for our hospitals services or change the basis on which we are paid could adversely affect our net operating revenue and profitability. Implementation of modifications to the admissions policies of our inpatient rehabilitation facilities as required in order to achieve compliance with Medicare regulations may result in a reduction of patient volume at these hospitals and, as a result, may reduce our future net operating revenues and profitability. Decreases in Medicare reimbursement rates received by our outpatient rehabilitation clinics or implementation of annual caps that limit the amount that can be paid for outpatient therapy services rendered to any Medicare beneficiary may reduce our future net operating revenues and profitability. Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information. As a result of increased post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us. We may be adversely affected by negative publicity which can result in increased governmental and regulatory scrutiny and possibly adverse regulatory changes. Future acquisitions or joint ventures may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities. Future cost containment initiatives undertaken by private third-party payors may limit our future net operating revenues and profitability. If we fail to maintain established relationships with the physicians in the areas we serve, our net operating revenues may decrease. Changes in federal or state law limiting or prohibiting certain physician referrals may preclude physicians from investing in our hospitals or referring to hospitals in which they already own an interest. Shortages in qualified nurses or therapists could increase our operating costs significantly. Competition may limit our ability to acquire hospitals and clinics and adversely affect our growth. If we fail to compete effectively with other hospitals, clinics and healthcare providers in our local areas, our net operating revenues and profitability may decline. Our business operations could be significantly disrupted if we lose key members of our management team. Significant legal actions as well as the cost and possible lack of available insurance could subject us to substantial uninsured liabilities. Concentration of ownership among our existing executives, directors and principal stockholders may prevent new investors from influencing significant corporate decisions. We are a holding company and therefore depend on our subsidiaries to service our obligations under our indebtedness and for any funds to pay dividends to our stockholders. Our ability to repay our indebtedness or pay dividends to our stockholders depends entirely upon the performance of our subsidiaries and their ability to make distributions. Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business. Our senior secured credit facility requires Select to comply with certain financial covenants, the default of which may result in the acceleration of certain of our indebtedness. Despite our substantial level of indebtedness, we and our subsidiaries may be able to incur additional indebtedness. This could further exacerbate the risks described above. Our inability to access external sources of financing when our senior secured credit facility terminates could have a material adverse effect on our business, operating results and financial condition.

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1035688--3/17/2010--SELECT_MEDICAL_HOLDINGS_CORP