Healthcare Services Research

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1 Healthcare Services Research Dana Hambly, CFA (615) The analyst primarily responsible for the preparation of the content of this presentation certifies that (i) all views expressed in this presentation accurately reflect the analyst s personal views about the subject company and securities, and (ii) no part of the analyst s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in this presentation. See important disclosures and analyst certification on page of this presentation. This presentation constitutes a compendium report (covers six or more subject companies). As such, Stephens Inc. chooses to provide specific disclosures for the companies mentioned by reference. To access current disclosures for the companies in this presentation, clients should refer to or contact your Stephens Inc. representative for additional information Stephens Inc. 111 Center Street Little Rock, AR stephens.com Member NYSE, SIPC

2 Table of Contents 3. Healthcare Services Coverage Valuation 4. Healthcare Services Coverage Performance 5. Relative Valuation 6. Valuation Table 7. Valuation Table (Continued) 8. Election Issues 9. Election Issues 10. Physician Staffing Trends 11. Physician Staffing Trends 12. Physician Staffing Trend 13. Hospital Outsourcing & ASC Companies 14. Air Methods Corp. (AIRM) 15. Amsurg Corp (AMSG) 16. Envision Healthcare (EVHC) 17. Nobilis Health (HLTH) 18. MEDNAX Inc. (MD) 19. Surgical Care Affiliates (SCAI) 20. Team Health Holdings Inc. (TMH) 21. Other Healthcare Facilities 22. Acadia Healthcare (ACHC) 23. Adeptus Health (ADPT) 24. Hanger Inc.(HNGR) 25. U.S. Physical Therapy, Inc. (USPH) 26. Post-Acute Care and Senior Living 27. Post-Acute Care Continuum 28. Post-Acute Winners and Losers 29. Amedisys (AMED) 30. LHC Group (LHCG) 31. Addus HomeCare Corp. (ADUS) 32. The Ensign Group (ENSG) 33. Genesis Healthcare (GEN) 34. BioScrip Inc. (BIOS) 35. Senior Housing Supply/Demand 36. Brookdale Senior Living (BKD) 37. Capital Senior Living (CSU) 38. Healthcare REITs Comp Table 39. Healthcare REITs Overview 40. Why we picked them up? 41. Care Capital Properties (CCP) 42. CareTrust REIT (CTRE) 43. Welltower (HCN) 44. National Health Investors (NHI) 45. U.S. Health Expenditures 46. U.S. Insured Population 47. U.S. Personal Health Expenditures by Provider 48. Aggregate Medicare Spending by Sector 49. Per Capita Medicare Spending by Sector 50. Companies Mentioned 51. Disclosures 52. Disclosures 53. Disclosures 2

3 Healthcare Services Coverage Valuation Mkt Cap Ent Value Shares Target Price Adjusted EPS Price / Earnings EBITDA (MM) EV/EBITDA Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 11-Oct E 2017E E 2017E Hospital Outsourcing & Staffing Air Methods Corp AIRM OW (Vol) $ 1,157 $ 2, $ $ $ 3.30 $ x 8.1x $ 335 $ x 5.7x 3.0x 2.6x Envision Healthcare EVHC OW (Vol) $ 4,099 $ 6, $ $ $ 1.42 $ x 13.4x $ 716 $ x 8.8x 5.1x 4.3x MEDNAX, Inc MD EW $ 6,143 $ 7, $ $ $ 4.14 $ x 14.4x $ 677 $ x 10.5x 3.0x 2.7x Team Health Holdings TMH OW (Vol) $ 2,877 $ 5, $ $ $ 2.59 $ x 13.2x $ 487 $ x 9.5x 6.0x 4.7x Hospital Outsourcing Average 13.9x 12.3x 9.6x 8.6x Other Healthcare Services & Facilities Acadia Healthcare ACHC OW (Vol) $ 4,238 $ 7, $ $ $ 2.64 $ x 15.0x $ 645 $ x 10.5x 8.0x 5.0x Adeptus Health ADPT OW (Vol) $ 833 $ $ $ $ 2.53 $ x 11.9x $ 110 $ x 6.6x 1.7x 1.2x Amsurg Corp AMSG OW (Vol) $ 3,850 $ 6, $ $ $ 4.32 $ x 13.8x $ 595 $ x 9.8x 5.2x 4.3x Hanger Inc. HNGR EW (Vol) $ 290 $ NE $ 8.12 NA NA NA NA NA NA NA NA 3.0x NA Nobilis Health HLTH OW (Vol) $ 260 $ $ 6.00 $ 3.48 $ 0.22 $ x NA $ 50 $ x NA 0.9x 0.8x Surgical Care Affiliates, Inc SCAI EW (Vol) $ 1,912 $ 2, $ $ $ 1.92 $ x 20.9x $ 198 $ x 12.7x 4.9x 4.4x US Physical Therapy USPH EW (Vol) $ 787 $ $ $ $ 2.20 $ x 26.9x $ 55 $ x 13.8x 0.8x 0.8x Other HC Facilities Average 19.6x 17.7x 11.0x 10.7x Home Care Addus HomeCare ADUS OW $ 311 $ $ $ $ 1.25 $ x 19.4x $ 30 $ x 8.4x 1.7x 1.3x Home Healthcare Average 21.7x 19.4x 9.3x 8.4x Infusion Services BioScrip Inc BIOS OW (Vol) $ 358 $ $ 3.25 $ 3.04 $ (0.20) $ (0.05) NA NA $ 45 $ x 13.8x 28.8x 10.2x Infusion Services NA NA 17.2x 13.8x Mkt Cap Adj EV Shares Target Price Adjusted EPS Price / Earnings EBITDAR (MM)* AEV/EBITDAR* Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 11-Oct E 2017E E 2017E Post-Acute Care Facilities Ensign Group Inc. ENSG OW (Vol) $ 1,007 $ 2, $ $ $ 1.34 $ x 12.5x $ 271 $ x 7.1x 5.3x 4.3x Genesis Healthcare GEN OW (Vol) $ 409 $ 5, $ 2.50 $ 2.65 $ (1.29) $ (0.81) N/A N/A $ 720 $ x 7.4x 7.0x 7.1x Post-Acute Care Facilities Average 14.9x 12.5x 7.8x 7.2x Mkt Cap Adj EV Shares Target Price CFFO P/CFFO EBITDAR (MM)* AEV/EBITDAR* Leverage Symbol Rating (MM) (MM) Out (MM) Price 11-Oct E 2017E E 2017E Senior Living Brookdale Senior Living Inc. BKD OW (Vol) $ 2,904 $ 12, $ $ $ 2.54 $ x 5.9x $ 1,249 $ 1, x 10.0x 8.2x 8.1x Capital Senior Living Corp CSU OW (Vol) $ 489 $ 1, $ $ $ 1.77 $ x 7.9x $ 154 $ x 11.6x 10.2x 9.5x Senior Living Average 7.7x 6.9x 11.4x 10.8x Mkt Cap EV Shares Target Price FFO P/FFO EBITDA (MM) EV/EBITDA Leverage Symbol Rating (MM) (MM) Out (MM) Price 10/11/ E 2017E E 2017E Healthcare REITs Care Capital Partners CCP OW $ 2,219 $ 3, $ $ $ 2.95 $ x 9.3x $ 304 $ x 11.9x 6.4x 4.8x CareTrust REIT, Inc. CTRE OW $ 783 $ 1, $ $ $ 1.09 $ x 11.3x $ 85 $ x 12.5x 6.9x 5.0x Welltower, Inc HCN OW $ 24,603 $ 36, $ $ $ 4.57 $ x 14.8x $ 2,283 $ 2, x 15.6x 6.0x 5.5x National Health Investors NHI OW $ 2,931 $ 3, $ $ $ 4.88 $ x 14.6x $ 235 $ x 16.1x 4.8x 4.6x REIT Average 12.9x 12.5x 14.8x 14.0x *SNF rent capitalized at 12.5%; AL/IL rent capitalized at 10%; HLS and SEM estimates & valuation are EBITDA and EV/EBITDA, respectively. Consensus used when Stephens estimates are unavailable. Source: FactSet Research Systems; Stephens Inc. 3

4 Healthcare Services Coverage Performance YTD Returns 80.0% 60.0% 40.0% 20.0% 0.0% (20.0%) (40.0%) BIOS AMED USPH ADUS SCAI BKD ENSG MD AMSG LHCG EVHC CSU ACHC GEN AIRM ADPT TMH HNGR YTD Returns 62.3% 23.9% 16.8% 13.8% 11.8% (3.8%) (5.6%) (9.4%) (14.8% (15.1% (17.4% (18.2% (20.7% (21.6% (22.6% (25.1% (27.2% (48.0% (60.0%) 60.0% 12-Month Returns 40.0% 20.0% 0.0% (20.0%) (40.0%) (60.0%) (80.0%) USPH SCAI AMED BIOS ENSG AIRM LHCG ADUS MD CSU AMSG BKD ACHC HNGR TMH EVHC GEN ADPT TTM Returns 39.7% 19.0% 17.4% (1.4%) (8.8%) (13.8%) (20.7%) (22.3%) (22.6%) (22.8%) (23.0%) (32.5%) (33.2%) (42.0%) (47.0%) (48.3%) (60.2%) (63.1%) Source: Factset Research Systems 4

5 Relative Valuation NTM EV/EBITDA Multiples 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x SCAI USPH USPH CSU BIOS AMED ACHC BKD AMSG ADUS MD LHCG TMH EVHC ENSG GEN ADPT AIRM Source: Factset Research Systems 5

6 Valuation Table Mkt Cap Ent Value Shares Target Price Adjusted EPS Price / Earnings EBITDA (MM) EV/EBITDA Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 30-Sep E 2017E E 2017E Hospitals Community Health Systems CYH NC $ 1,311 $ 16, NA $ $ 1.50 $ x 5.8x $ 2,397 $ 2, x 6.8x 5.3x 6.3x HCA HCA NC $ 28,637 $ 59, NA $ $ 6.59 $ x 10.7x $ 8,188 $ 8, x 6.9x 3.9x 3.8x LifePoint Hospitals LPNT NC $ 2,450 $ 5, NA $ $ 3.52 $ x 14.3x $ 746 $ x 6.3x 4.1x 3.9x Quorom Health Corp. QHC NC $ 185 $ 1, NA $ 6.27 $ (1.54) $ (0.28) NA NA $ 191 $ x 6.1x 4.8x 6.5x Tenet Healthcare THC NC $ 2,255 $ 16, NA $ $ 1.61 $ x 9.6x $ 2,459 $ 2, x 6.2x 6.3x 5.8x Universal Health Services UHS NC $ 11,999 $ 15, NA $ $ 7.47 $ x 15.1x $ 1,728 $ 1, x 8.4x 2.1x 2.0x Hospital Average 13.3x 11.1x 7.3x 6.8x Hospital Outsourcing & Staffing Air Methods Corp AIRM OW (Vol) $ 1,199 $ 2, $ $ $ 3.30 $ x 8.4x $ 335 $ x 5.8x 3.0x 2.6x AMN Healthcare Services AHS NC $ 1,531 $ 1, NA $ $ 2.32 $ x 12.3x $ 230 $ x 7.2x 2.2x 1.6x Cross Country Healthcare CCRN NC $ 389 $ NA $ $ 0.62 $ x 14.5x $ 44 $ x 8.2x 2.1x 1.8x Envision Healthcare EVHC OW (Vol) $ 4,168 $ 7, $ $ $ 1.42 $ x 13.7x $ 716 $ x 8.9x 5.1x 4.3x MEDNAX, Inc MD EW $ 6,199 $ 7, $ $ $ 4.14 $ x 14.5x $ 677 $ x 10.6x 3.0x 2.7x Team Health Holdings TMH OW (Vol) $ 2,415 $ 4, $ $ $ 2.59 $ x 11.1x $ 487 $ x 8.7x 6.0x 4.7x Hospital Outsourcing Average 14.4x 12.4x 9.4x 8.2x Other Healthcare Services & Facilities Acadia Healthcare ACHC OW (Vol) $ 4,332 $ 7, $ $ $ 2.64 $ x 16.0x $ 645 $ x 10.9x 8.0x 5.0x Adeptus Health ADPT OW (Vol) $ 895 $ 1, $ $ $ 2.53 $ x 12.7x $ 110 $ x 7.1x 1.7x 1.2x AAC Holdings, Inc AAC NC $ 412 $ NA $ $ 0.86 $ x 17.9x $ 50 $ x 9.3x 3.7x 3.2x Amsurg Corp AMSG OW (Vol) $ 3,916 $ 6, $ $ $ 4.32 $ x 14.1x $ 595 $ x 9.9x 5.2x 4.3x Hanger Inc. HNGR EW (Vol) $ 304 $ NE $ 8.50 NA NA NA NA NA NA NA NA 3.0x NA Nobilis Health HLTH OW (Vol) $ 258 $ $ 6.00 $ 3.33 $ 0.22 $ x 10.7x $ 50 $ x 4.6x 0.9x 0.8x Surgical Care Affiliates, Inc SCAI EW (Vol) $ 1,960 $ 2, $ $ $ 1.92 $ x 21.5x $ 198 $ x 13.0x 4.9x 4.4x Surgery Partners, Inc. SGRY NC $ 982 $ 2, NA $ $ 0.49 $ x 23.2x $ 188 $ x 10.2x 8.7x 7.3x US Physical Therapy USPH EW (Vol) $ 785 $ $ $ $ 2.20 $ x 26.8x $ 55 $ x 13.8x 0.8x 0.8x Other HC Facilities Average 22.7x 17.9x 11.3x 9.9x Home & Non-Institutional Health Addus HomeCare ADUS OW $ 300 $ $ $ $ 1.25 $ x 18.7x $ 30 $ x 8.1x 1.7x 1.3x Almost Family AFAM NC $ 382 $ NA $ $ 2.58 $ x 13.3x $ 54 $ x 9.0x 3.5x 2.7x Amedisys AMED EW (Vol) $ 1,591 $ 1, $ $ $ 1.66 $ x 23.0x $ 117 $ x 11.9x 0.8x 0.8x Chemed Corp CHE NC $ 2,284 $ 2, NA $ $ 7.25 $ x 18.2x $ 237 $ x 9.8x 0.6x 0.6x Civitas Solutions CIVI NC $ 678 $ 1, NA $ $ 0.42 $ x 21.9x $ 159 $ x 8.1x 4.6x 4.4x LHC Group LHCG OW (Vol) $ 669 $ $ $ $ 2.00 $ x 19.2x $ 77 $ x 10.2x 1.6x 1.4x Providence Service Corp PRSC NC $ 705 $ NA $ $ 2.67 $ x 14.0x $ 120 $ x 6.8x 2.5x 2.3x Home Healthcare Average 23.4x 18.3x 9.9x 9.1x Infusion and Institutional/Specialty Pharma BioScrip Inc BIOS OW (Vol) $ 330 $ $ 3.25 $ 2.90 $ (0.20) $ (0.05) NA NA $ 45 $ x 13.3x 28.8x 10.2x Diplomat Pharmacy DPLO NC $ 1,859 $ 1, NA $ $ 0.94 $ x 24.1x $ 125 $ x 12.6x 1.1x 0.8x Pharmerica PMC NC $ 864 $ 1, NA $ $ 2.01 $ x 12.4x $ 133 $ x 8.3x 2.9x 3.1x Home Infusion and Institutional Pharmacy Average 21.9x 18.3x 13.9x 11.4x Consensus used when Stephens estimates are unavailable. LHCG estimate is less NCI. Source: FactSet Research Systems; Stephens Inc. 6

7 Valuation Table Mkt Cap Adj EV Shares Target Price Adjusted EPS Price / Earnings EBITDAR (MM)* AEV/EBITDAR* Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 30-Sep E 2017E E 2017E Post-Acute Care Facilities HealthSouth Corp HLS NC $ 3,642 $ 6, NA $ $ 2.52 $ x 14.8x $ 788 $ x 7.9x 4.5x 3.9x Select Medical Holdings SEM NC $ 1,775 $ 4, NA $ $ 0.97 $ x 14.1x $ 518 $ x 7.9x 6.8x 5.2x Ensign Group Inc. ENSG OW (Vol) $ 1,016 $ 2, $ $ $ 1.34 $ x 12.7x $ 271 $ x 7.1x 5.3x 4.3x Kindred Healthcare Inc. KND NC $ 871 $ 7, NA $ $ 0.90 $ x 10.7x $ 986 $ 1, x 7.1x 6.5x 6.4x Genesis Healthcare GEN EW (Vol) $ 412 $ 5, $ 2.50 $ 2.67 $ (1.29) $ (0.81) NA NA $ 720 $ x 7.4x 7.0x 7.1x Post-Acute Care Facilities Average 13.2x 11.7x 7.6x 7.2x Mkt Cap Adj EV Shares Target Price CFFO P/CFFO EBITDAR (MM)* AEV/EBITDAR* Leverage Symbol Rating (MM) (MM) Out (MM) Price 30-Sep E 2017E E 2017E Senior Living Brookdale Senior Living Inc. BKD OW (Vol) $ 3,244 $ 13, $ $ $ 2.54 $ x 6.6x $ 1,249 $ 1, x 10.3x 8.2x 8.1x Capital Senior Living Corp CSU OW (Vol) $ 504 $ 1, $ $ $ 1.77 $ x 8.2x $ 154 $ x 11.7x 10.2x 9.5x Five Star Quality Care FVE NC $ 95 $ 2, NA $ 1.91 NA NA NA NA $ 234 $ x NA 8.8x 8.8x Senior Living Average 8.2x 7.4x 10.7x 11.0x Price / Earnings EV/EBITDA Indices Valuation S&P 500 SP x 16.3x 11.2x 10.2x S&P 500 Healthcare SP x 14.8x 12.1x 11.3x ishares US Healthcare Providers ETF IHF 16.1x 14.0x 8.7x 8.1x Source: FactSet Research Systems; Stephens Inc. 7

8 Election Issues Terrorism The economy and jobs The federal budget defecit Dissatisfaction with government Cost of YOUR health care/health insurance Gun control The situation in Iraq and Syria Immigration The 2010 health care law 28% 28% 28% 27% 26% 23% 23% 34% 38% When asked if the following issues would be extremely important to their vote for president, a KFF poll of registered voters showed Terrorism (38%) as the most cited answer followed by the economy/jobs (34%) and the federal budget (28%). The cost of healthcare was the fifth most important issue with 28% of respondents citing it, while the ACA was the 9 th most cited response. Taxes 22% Race relations 20% Climate change 16% 0% 5% 10% 15% 20% 25% 30% 35% 40% Source: Kaiser Family Foundation health Tracking Poll (January 13-19, 2016) According to a February 2016 Gallup poll that asked the open-ended question of what single issue or challenge are you most interested in having the next president address when he/she takes office?, voters on both sides of the aisle were most concerned with the economy. Healthcare along with education was the second most cited concern by Democrats at 12%, with 11% of Republicans also calling it out. Though Republican voters were more concerned with Immigration (19%), defense/national security (19%). 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 19% 19% 19% 13% 11% 5% 12% 11% 7% 7% 12% 1% 6% 5% 5% 8% 4% 6% 5% 3% Democrats Republicans Source: Gallup Poll 8

9 Election Healthcare Issues Hillary Clinton Healthcare Proposals Defend the ACA: Secretary Clinton wants to defend the ACA against Republican efforts to repeal it. She will support new incentives to encourage all states to expand Medicaid. She plans to invest $500 million annually in an aggressive enrollment plan to ensure more people enroll in affordable healthcare plan options. Secretary Clinton also wants to expand access to healthcare to families regardless of immigration status. Lower out of pocket costs like copays and deductible: Secretary Clinton wants to reduce the cost of purchasing healthcare on exchanges by providing a tax credit of up to $5,000 per family to offset out-of-pocket costs above 5% of their income, with tax credits to ensure families who acquire healthcare coverage on exchanges do not spend more than 8.5% of their income. Reduce the cost of prescription drugs: While high healthcare costs will always face political risk, we believe Secretary Clinton is most focused on drugs costs and working to lower them. Transform the healthcare system to reward value and quality: The ACA contained many initiatives for healthcare providers to collect data, which is then used to measure value and quality and reward providers who are able to provide quality care. Secretary Clinton plans to continue to pursue these initiatives. Donald Trump Healthcare Proposals Repeal the ACA: Mr. Trump believes no person should be required to buy insurance unless he or she wants to. Modify existing law that inhibits the sale of health insurance across state lines: As long as a plan purchased complies with state requirements, any vendor ought to be able to offer insurance in any state. Allow individuals to fully deduct health insurance premium payments from their tax returns: Businesses are allowed to deduct these expenses, so Mr. Trump believes that individuals should receive the same exemption. Make sure no one slips through the cracks: Mr. Trump wants to review basic options for Medicaid and work with states to ensure that those who want healthcare coverage can have it. Allow individuals to use Health Savings Accounts Require price transparency from all healthcare providers: In particular, doctors, clinics, and hospitals should report pricing and allow individuals to shop for the best pricing. Block-grant Medicaid to the state: States should administer Medicaid themselves without federal overhead. Remove barriers to entry for drug providers: Mr. Trump believes consumers should be able to access imported, safe, dependable drugs from overseas. Source: HillaryClinton.com, DonaldJTrump.com 9

10 Expanding Scope: Physician Staffing Moving Towards Full Suite of Options Pressure on healthcare systems volume and reimbursement are expected to persist for several years, which is driving greater utilization for outsourced clinical services. Anesthesia, emergency services, dialysis, imaging and hospitalist services are the most outsourced clinical services and we expect to see that trend accelerate. These services are ripe for outsourcing as they allow healthcare systems to offer a full complement of services without the burden of attracting and retaining physicians that do not necessarily drive hospital volume. Having expertise in multiple service lines is an advantage for larger companies as the outsourcing trend continues. Physician Staffing Services EVHC AMSG MD SCAI TMH Ambulatory Surgery Centers Anesthesia Children's Services Emergency Medicine Hospitalist ICU Intensivist Physician Recruitment Radiology Staffing Transitional / Post Acute Care Coordination 100% 80% 60% 40% 20% Top 5 Reasons to Outsource Top % Outsourced Clinical Services Anesthesia NA 42% 37% Emergency Medicine NA 20% 36% Dialysis Services NA 34% 32% Diagnostic Imaging 23% 24% 25% Hospitalist NA 24% 25% 0% Expertise of vendor Cost savings Add a new service line Revenue enhancement Request by physicians Source: Stephens Inc., Waller Law, Company Filings 10

11 The Case for National Physician Groups Facilities: Why Outsource? Physicians: Why Join a Larger Group? For hospitals/health systems who outsource, 57% outsourced for patient care. As a reference point, only 30% outsourced IT needs (Waller, Healthcare Outsourcing 2012). The most common reasons for outsourcing was expertise of the vendor (88%) and cost savings (47%). The Emergency Department has been a focal point for increased outsourcing, as 20% of 2008 respondents outsourced ED needs. This increased to 36% in 2012 and may be due to the fact that community hospitals find it difficult to recruit and manage ED physicians. Anesthesia continues to be the most outsourced physician service. Contract anesthesia services can be more cost-effective than allowing surgeons to choose an anesthesiologist for each surgery. As physician groups become national in scope and scale, they can better implement best practices. A recent report by the Commonwealth Fund found that hospital or health system owned physician practices were more likely to engage in quality improvement activities than independent physicians. 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Anesthesia Emergency Department Dialysis Hospitalist % 20% 34% 24% % 36% 32% 25% According to the AMA, the percentage of physicians who own their practices has fallen from 76.1% in 1983 to 50.8% in This has been particularly true for medical specialists. Why do physicians join larger practices/hospitals? Greater bargaining power with managed care companies Reduced administrative responsibility Better access to leading-edge health IT Generally shorter and more predictable hours, along with the security of a contract Complexity of coordinating care for chronically ill patients makes it advantageous to belong to a multi-specialty group Independent Physicians Declining Source: Stephens Inc., Company Filings, Waller, The Commonwealth Fund, NEJM 11

12 MACRA: Path #1: Merit-Based Incentive Payment System (MIPS) Who participates? Physicians who charge less than $10,000 and provide care to <100 Medicare patients annually are exempted. Now (Years 1 and 2): Physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists. Possibly later Years 3+: physical/occupational therapists, speech-language pathologists, audiologists, nurse midwives, clinical social workers, clinical psychologists, dieticians/nutritional professionals CMS estimates that 687, ,000 eligible physicians will receive payment adjustments through the MIPS track in 2019 Timeline: CMS held a comment period through June 27 th with a final rule expected in September 2017: Performance period begins 2018: Reporting and Data Collection 2019: MIPS begins to pay for quality with 4% at risk Implementation Timeline ( ) Payment Timeline ( ) % +5% +7% +9% Reporting and Data Collection MIPs Begins to Pay for Quality and beyond Performance period: January- December. 1 st feedback report in July. Source: CMS July 2018: 2 nd feedback report, targeted review based on 2017 MIPS Performance CMS estimates budget neutral payments/penalties at $833 million in % -5% -7% -9% 12

13 Hospital Outsourcing & Surgery Centers Mkt Cap Ent Value Shares Target Price Avg. Daily Short Price / Earnings EV/EBITDA Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 19-Sep-16 Volume Interest Float Hospital Outsourcing & Staffing Air Methods Corp AIRM OW (Vol) $ 1,208 $ 2, $ $ , % 91.2% 9.6x 8.5x 8.5x 5.8x 3.0x 2.6x Amsurg Corp AMSG OW (Vol) $ 3,799 $ 6, $ $ ,241, % 97.7% 15.1x 13.7x 13.7x 9.7x 5.2x 4.3x Envision Healthcare EVHC OW (Vol) $ 4,043 $ 6, $ $ ,707, % 99.0% 15.2x 13.3x 13.3x 8.8x 5.1x 4.3x MEDNAX, Inc MD EW $ 6,056 $ 7, $ $ , % 97.9% 15.6x 14.2x 14.2x 10.4x 3.0x 2.7x Team Health Holdings TMH OW (Vol) $ 2,418 $ 4, $ $ , % 99.0% 12.6x 11.1x 11.1x 8.7x 6.0x 4.7x Nobilis Health HLTH OW (Vol) $ 265 $ $ 6.00 $ , % 68.0% 15.5x 11.0x 11.0x 4.7x 0.9x 0.8x Surgical Care Affiliates, Inc SCAI EW (Vol) $ 1,672 $ 2, $ $ , % 69.2% 21.7x 18.3x 18.3x 11.6x 4.9x 4.4x Source: Factset Research Systems, Stephens Inc. 13

14 Air Methods Corp. (AIRM) $51/OW (Vol) Air Methods Corp. is the largest provider of air medical emergency transport services and systems throughout the United States. Investment Thesis and Valuation Recent changes better align company with shareholder interests: AIRM recently added Joseph Whitters to the board in an agreement reached with activist investor Voce, which has been pressing for a privatization. The Company also agreed to declassify the board, so members will be up for election annually. We are encouraged that one of the key operational goals for 2016 short-term incentive compensation is a reduction in days' sales outstanding (language not in the 2015 proxy). Buyback: The Company has repurchased 1.4 million shares for $50.6 million since the end of the first quarter. The Company repurchased $38.3 million in 2Q which suggests AIRM bought back $12.3 million in July and the first three days of August. The Company has $122.5 million remaining on the current authorization. AIRM emphasized in the prepared remarks that its first priority for capital deployment is to repurchase shares. This seems a correct and easy decision to us given the depressed valuation at just over 6x EBITDA. A Reminder, Peer M&A: KKR acquired Air Medical Group for ~9.5x EBITDA in Valuation: Our $51 PT is based on 8.5x our 2016 EBITDA. Drivers Revenue EBITDA Patient Transports Rev/Transport $ thousands $ thousands Adj. EPS 3Q15A 17,330 $12,839 $311,342 $105,163 $1.18 3Q16E 19,930 $12,839 $340,325 $113,700 $1.31 FY 2014A 57,940 $11,737 $1,004,773 $264,268 $2.56 FY 2015A 63,104 $12,125 $1,085,686 $287,514 $2.77 FY 2016E 74,552 $12,126 $1,213,973 $335,065 $3.30 FY 2017E 77,704 $12,477 $1,287,021 $366,978 $3.75 Source: Company reports, Stephens Inc. Estimates Revenues Sales of medical interiors and products 2% Tourism 11% Air medical services contract revenue 11% Dispatch and billing 1% Patient transport revenue, net 75% Source: Company filings Valuation (EV/EBITDA) 11.0X 10.0X 9.0X 8.0X 7.0X 6.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 14

15 AMSURG Corp. (AMSG) $94/OW (Vol.) 2016 Best Idea AMSURG Corp. develops, acquires and operates practice-based ambulatory surgery centers in partnership with physician practice groups as well as healthcare systems. The Company also operates a physician outsourcing company through its Sheridan subsidiary. Investment Thesis and Valuation AMSG-EVHC Strategic Rationale: The deal makes AMSG immediately meaningful in the ER sector; EVHC's large hospitalist group better positions AMSG to participate in value-based purchasing initiatives; and EVHC's Evolution Health extends AMSG's reach into the postacute world (primarily home health) which is also important in the move to value-based purchasing. Synergies: The Company expects to achieve $100 million in revenue and cost synergies over a 3-year period. At 1% of estimated combined revenue, this seems to be a conservative estimate particularly when compared to the $200 million-$290 million AMSG cited in its pursuit of Team Health (TMH, OW/Vol) ($40 million-$60 million related to TMH/IPCM synergies). Accretion: We estimate that the deal is slightly accretive to 2017 adjusted EPS. We are curious as to the drivers of the "double-digit" accretion expected by the combined Company in We expect more details on the call. Leverage: Leverage for the combined companies is expected to remain comparable to the respective individual companies at ~4.2x. Based on our expectations for 2017 EBITDA and assuming one third of synergies are achieved, leverage should move toward 3.5x. The larger entity should also enjoy a reduction in its cost of capital. Valuation: Our $94 PT is based on ~11x our 2017 PF EBITDA. Drivers Revenues EBITDA - NCI ASC Revenue Sheridan Revenue $ thousands $ thousands Adj. EPS 3Q15A $308,983 $341,244 $650,227 $133,177 $1.03 3Q16E $314,319 $445,323 $759,642 $154,139 $1.11 FY2014A $1,109,935 $1,079,000 $1,621,949 $304,482 $2.75 FY2015A $1,230,050 $1,336,834 $2,566,884 $492,260 $3.46 FY2016E $1,272,998 $1,770,458 $3,043,457 $595,237 $4.32 FY2017E $1,355,641 $1,962,316 $3,317,957 $649,298 $4.76 Source: Company filings and Stephens Inc. estimates Orthopedic 6% ASC Revenues (FY 15) Sheridan Revenues (FY 15) Multispecialty 29% GI Endoscopy 52% Office based 3% Children's 7% ER 6% Radiology 13% Anesthesiology 71% Ophthalmology 13% Source: Company filings Valuation (EV/EBITDA) 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 15

16 Envision Healthcare (EVHC) $32 PT/OW (Vol. ) Headquartered in Greenwood Village, CO, with over 49,000 employees, EVHC operates in two primary segments: Outsourced physician staffing and solutions (EmCare) and medical transportation (AMR). It has also recently expanded into integrated health consulting (Evolution Health). Investment Thesis and Valuation AMSG-EVHC Strategic Rationale: The deal makes AMSG immediately meaningful in the ER sector; EVHC's large hospitalist group better positions AMSG to participate in valuebased purchasing initiatives; and EVHC's Evolution Health extends AMSG's reach into the post-acute world (primarily home health) which is also important in the move to value-based purchasing. Synergies: The Company expects to achieve $100 million in revenue and cost synergies over a 3-year period. At 1% of estimated combined revenue, this seems to be a conservative estimate particularly when compared to the $200 million-$290 million AMSG cited in its pursuit of Team Health (TMH, OW/Vol) ($40 million-$60 million related to TMH/IPCM synergies). Accretion: We estimate that the deal is slightly accretive to 2017 adjusted EPS. We are curious as to the drivers of the "double-digit" accretion expected by the combined company in We expect more details on the call. Leverage: Leverage for the combined companies is expected to remain comparable to the respective individual companies at ~4.2x. Based on our expectations for 2017 EBITDA and assuming one-third of synergies are achieved, leverage should move toward 3.5x. The larger entity should also enjoy a reduction in its cost of capital. Valuation: Our $32 PT is based on ~11x our 2017 PF EBITDA. Locum Tenens 4% Drivers Revenue Adj. EBITDA AMR Revenue EmCare Revenue $ '000 $ '000 Adj. EPS 3Q2015A $433,429 $933,941 $1,367,370 $142,478 $0.30 3Q2016E $621,624 $1,087,854 $1,709,478 $182,653 $0.36 FY2014A $1,555,186 $2,842,458 $4,397,644 $553,484 $1.19 FY2015A $1,799,524 $3,648,392 $5,447,916 $604,319 $1.28 FY2016E $2,397,211 $4,269,840 $6,667,050 $715,696 $1.42 FY2017E $2,590,666 $4,703,540 $7,294,206 $787,703 $1.63 Source: Stephens Inc., Company filings Post-Acute 7% Anesthesiology 7% Radiology 1% Hospitalists 10% EmCare Other 2% Emergency Department 68% Surgery Services 1% Self-pay 5% Subsidies 3% Fees/other 16% AMR Commercial/MC 37% Medicare 30% Medicaid 9% Source: Company filings Valuation (EV/EBITDA) 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 16

17 Nobilis Health (HLTH) $6/OW (Vol) Nobilis Health is an owner, operator and manager of ASCs and surgical hospitals. The Company, through the acquisition of Athas Health in December 2014, is also a pioneer in direct-to-patient (DTP) marketing campaigns, utilizing its proprietary technology platform to source patients and drive incremental volume to facilities. Investment Thesis and Valuation M&A: HLTH's appetite for additional M&A remains strong. HLTH is looking for multispecialty platform opportunities with in-network facilities. These facilities can benefit from additional volume driven by HLTH's marketing arm, which drove 67% of 2Q case volumes. A strong in-network portfolio deal does come at a premium with multiples near 10x. HLTH will buy revenue and EBITDA in these instances. The Company remains interested in distressed opportunities as well guidance: Nobilis reiterated guidance for 20% Y/Y organic growth, but dropped acquisitions from guidance, which we applaud as the timing of acquisitions is too uncertain. As a result, the Company now guides to $275 million of revenues and $51 million in adj. EBITDA. AZ Acquisition: Nobilis has reached a definitive agreement to acquire Arizona Vein and Vascular Center (Private) and its four related surgery centers for $22 million + a performance-based earn-out. The deal should add at least ~$6 million in annualized EBITDA, or ~10% of our current 2017 estimate. As far as synergies go, Arizona Vein should benefit from Nobilis's marketing arm and will also have access to HLTH's surgical hospital in the Phoenix area, where it can perform high acuity procedures. Valuation: Our $6 PT assumes 10x our Street-low 2016 EBITDA estimate. Drivers Revenue EBITDA Facility Cases Rev/Facility Case Marketing Cases Rev/Mkting Case $ thousands $ thousands Adj. EPS 3Q2015A 4,051 $11, $12,016 $52,483 $11,335 $0.16 3Q2016E 4,456 $12, $13,218 $61,249 $7,715 $0.02 FY2014A 8,316 $9, $5,120 $84,029 $10,400 $0.07 FY2015A 16,581 $12,269 1,233 $10,629 $229,216 $41,819 $0.68 FY2016E 18,206 $13,650 1,143 $16,320 $274,838 $50,249 $0.22 FY2017E 20,937 $14,059 1,257 $1,257 $323,245 $62,851 $0.31 Source: Company filings, Stephens Inc. estimates Plastic & Reconstructive 10% Orthopedics 10% Other 14% Case Type Pain Management 35% Spine 10% Bariatric 21% Source: Company filings Valuation (EV/EBITDA) 9.0X 7.0X 5.0X 3.0X 1.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 17

18 MEDNAX, Inc. (MD) $68/EW MEDNAX, Inc. is a national medical group that comprises the broad physician services of Pediatrix Medical Group and American Anesthesiology. The Pediatrix Medical Group and American Anesthesiology units, through their affiliated professional corporations, provide physician services, including neonatology, maternal-fetal medicine, pediatric cardiology, pediatric intensive care, pediatric and OBGYN hospitalist services, anesthesiology, and teleradiology. Investment Thesis and Valuation vrad weighs on 2Q growth: MD saw a change in the mix of teleradiology services related to a change in behavior for on-site radiologists which are off-loading most of their overnight reads to vrad for final reads as opposed to preliminary reads. The overnight reads tend to be simple x- rays with higher volume, but lower margins. This has created capacity issues for the teleradiologists resulting in foregone incremental business and a significant increase in physician recruiting. The Company anticipates that this issue weighs on 3Q EBITDA growth by 3%-4% and has a slight negative impact on organic growth. Cardon Outreach and other M&A: YTD, Mednax has been active from an M&A perspective. They have acquired seven practices in the first half of the year, with another practice acquisition after the quarter. Cardon Outreach acquisition is the largest at $400 million for ~$36 million of EBITDA and reflects MD's continued interest in revenue cycle management. In particular, these RCM platforms are focused on collections from patients which has become important due to the increasing prevalence of high deductible plans. These RCM businesses also give Mednax another touch-point in hospitals and health systems, which can create additional cross-selling. With leverage around 2x, the balance sheet is in good shape and supports additional acquisition opportunities. Valuation: Our $68 PT is based 12x our 2016 EBITDA. Drivers Revenue EBITDA Same store revenue Acquired revenue $ thousand $ thousand Adj. EPS 3Q15A $618,988 $103,285 $722,273 $168,189 $1.10 3Q16E $736,718 $82,504 $819,223 $179,510 $1.10 FY2014A $2,240,895 $198,018 $2,438,913 $559,067 $3.56 FY2015A $2,435,514 $344,482 $2,779,996 $622,725 $4.07 FY2016E $2,839,432 $324,117 $3,182,685 $677,445 $4.14 FY2017E $3,226,821 $285,008 $3,511,829 $755,387 $4.56 Source: Company filings, Stephens Inc. estimates Pediatric cardiology 4% Maternal-fetal 9% Other 2% Segment (FY 15) Anesthesia 37% Radiology 4% Neonatal and other pediatric subspecialties 44% Source: Company filings Valuation (EV/EBITDA) 14.0X 13.0X 12.0X 11.0X 10.0X 9.0X 8.0X 7.0X 6.0X 1-Year 3-Year 5-Year Current Avg. Source: Factset Research Systems 18

19 Surgical Care Affiliates (SCAI) $52/EW (Vol) Surgical Care Affiliates is one of the largest operators of ASCs in the country with over 190 centers in its systemwide network. SCAI was founded in 2007 and headquartered in Deerfield, IL. Investment Thesis and Valuation Multi-Faceted Growth Strategy Drives Sustainability: We expect SCAI s market leadership to continue to drive sustainable 8%-11% EBITDA-NCI growth through a multi-faceted approach, including same-site growth (2%-3%), in-market co-developments (3%-4%), and new partnerships & acquisitions (3%-4%). Recent 2016 guidance for 13%-16% EBITDA NCI growth in 2016 suggests that growth is ramping going into De novos, M&A activity: SCAI has done de novos in the past, but they are placing a greater focus on this strategy as a result of their new partnerships with health plans and systems. This structure allows SCAI to reach out to surgeons who are not currently partners and purpose-build a de novo facility with the design aspects they are looking for, which is especially beneficial for total joint/complex spine and potentially other higher acuity procedures. The Company expects to open 2 de novos in 2017 with several additional sights planned which should enhance the ROIC profile given the superior return profile. Valuation: Our $52 price target is based on 13x our 2017 adjusted EBITDA-NCI estimate. Drivers Revenue EBITDA Systemwide cases Systemwide price Systemwide Revenue $ thousands $ thousands Adj. EPS 3Q15A 206,255 $2,072 $448,300 $257,800 $42,200 $0.46 3Q16E 227,160 $2,184 $517,052 $303,279 $47,741 $0.46 FY2014A 713,974 $2,027 $1,534,368 $864,700 $156,600 $2.12 FY2015A 811,058 $2,122 $1,801,200 $1,051,400 $175,300 $2.02 FY2016E 916,097 $2,215 $2,112,740 $1,248,266 $198,093 $1.92 FY2017E 1,019,968 $2,281 $2,411,429 $1,397,131 $218,130 $2.27 Source: Company filings, Stephens Inc. estimates Pain 8% ENT 9% General Surgery 21% Case Mix Orthopedic 37% Source: Company filings Gastroenterology 10% Opthalmology 15% Valuation (EV/EBITDA) 16.0X 14.0X 12.0X 10.0X 8.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 19

20 Team Health Holdings Inc. (TMH) $50/OW (Vol) Team Health Holdings is one of the largest suppliers of outsourced healthcare management and administrative services to hospitals and other healthcare providers in the U.S. Investment Thesis and Valuation New CEO Leif Murphy: TeamHealth announced the retirement of its CEO Michael Snow. Leif Murphy, former CFO of LifePoint (LPNT, NC) has been appointed its new President and CEO. Given the troubles with the IPC acquisition, the rejected AMSG bid, the precipitous share price decline, and the presence of an activist in the stock, this announcement is not entirely unforeseen. While a surprise change at the CEO position is not usually indicative that all is well, we think Mr. Murphy's extensive healthcare experience, his familiarity with the investment community, and maintained guidance all make this news easier to digest. Revenue outlook: IPC closed on November 23, 2015 so 2017 revenue growth should revert to more historic levels. We believe that TMH continues to target revenue growth in the high-single digit, low-double digit range. We assume the longer-term growth contribution is driven by 3%-5% same contract growth, 1%-3% new contract growth, and 5%-7% acquisition growth. New contract growth had historically ranged from 2%-4%, but in the last couple of years TMH has been more successful on "hybrid" sales in which contracts that have been identified as new opportunities become eventual acquisition targets. Valuation: With the stock trading at <12x 2017 EPS, less than 9x adj. EBITDA, an improving balance sheet and easier comps in the back half of the year, we like the risk-reward at these levels. Our $50 PT is based on 11x our 2017 adj. EBITDA estimate. Driver Revenues EBITDA Same Contract Growth New Contract Growth Acquired Contract Growth $ thousands $ thousands Adj. EPS 3Q2015A 2.7% 4.4% 19.2% $899,181 $101,113 $0.68 3Q2016E 2.5% 2.0% 5.4% $1,178,354 $128,550 $0.67 FY2014A 5.9% 1.2% 11.2% $2,819,643 $325,232 $2.30 FY2015A 4.3% 3.5% 19.8% $3,597,247 $387,539 $2.65 FY2016E 3.4% 1.5% 4.9% $4,644,617 $486,679 $2.59 FY2017E 2.4% 2.4% 4.9% $5,085,541 $548,250 $2.93 Source: Company filings, Stephens Inc. estimates Other 1% Self pay 15% Commercial 26% Payor Mix Medicare 28% Medicaid 30% Source: Company filings Valuation (EV/EBITDA) 15.0X 14.0X 13.0X 12.0X 11.0X 10.0X 9.0X 8.0X 7.0X 6.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 20

21 Other Healthcare Facilities Mkt Cap Ent Value Shares Target Price Avg. Daily Short Price / Earnings EV/EBITDA Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 22-Sep-16 Volume Interest Float Other Healthcare Services & Facilities Acadia Healthcare ACHC OW (Vol) $ 4,410 $ 7, $ $ ,084, % 78.6% 19.1x 16.3x 16.3x 11.0x 8.0x 5.0x Adeptus Health ADPT OW (Vol) $ 889 $ 1, $ $ , % 80.5% 16.9x 12.7x 12.7x 7.0x 1.7x 1.2x Hanger HNGR EW (Vol) $ 308 $ NE $ ,913 NA 90.4% NA NA NA NA 3.0x NA U.S. Physical Therapy USPH EW (Vol) $ 789 $ $ $ , % 96.0% 28.6x 26.9x 26.9x 13.9x 0.8x 0.8x Source: Factset Research Systems, Stephens Inc. 21

22 Acadia Healthcare (ACHC) $70/OW (Vol.) Acadia Healthcare Co., headquartered in Franklin, TN, is the largest pure-play behavioral healthcare company in the world with approximately 8,600 beds in 37 states, the UK and Puerto Rico. Investment Thesis and Valuation CMA Review & the UK Market: The CMA believes there are reasonable grounds that ACHC s "undertakings" to address competitive concerns on the Priory acquisition may be acceptable. ACHC is offering to sell 19 facilities with 750 beds consisting of both PiC and Priory facilities which generate ~$132 million in revenue and ~$39 million of EBITDA assuming a $1.30 exchange rate. This represents ~10% of our UK revenue and EBITDA estimates. Assuming a range of 8x-10x we estimate gross proceeds of $312 million - $390 million. The Company expects that it can re-deploy the proceeds into the UK market within 90 days and noted that the CMA review process has not dampened ACHC's excitement for the UK market. ACHC is optimistic this process is completed in the next 2-4 months. Strong cash continues to be deployed to M&A, bed adds; expect some future deleveraging: While ACHC works to digest its acquisition of Priory, we believe the acquisition pipeline will be more focused on the U.S, with some bed adds in the UK. YTD, they have added 515 beds and are on pace for 800 in 2016, their most active year. Looking to 2017, the Company has already identified 300 bed adds, and we wouldn't be surprised if they repeat 2016's performance. They will also to look to enter into more JVs with health systems to build de novos (4-6 of these JVs by the end of the year). Goal of $6 billion of revenue by 2020 driven by continued high-single-digit organic growth, plenty of M&A: ACHC established a new goal for $6 billion of revenue by EOY This implies ~20% revenue CAGR and assumes ~8% annual organic growth with the balance from a robust acquisition pipeline. Valuation: Our $70 PT is based on 13x our 2017 EBITDA. Drivers Revenue EBITDA US Patient Days US Rev/Patient Day UK Revenue $ thousands $ thousands Adj. EPS 3Q2015A 542,345 $ $97,875 $479,730 $108,468 $0.62 3Q2016E 627,896 $ $311,672 $766,216 $169,515 $0.68 FY2014A 1,262,445 $ $151,127 $1,004,601 $215,488 $1.54 FY2015A 2,025,338 $ $360,698 $1,794,492 $404,832 $2.23 FY2016E 2,398,927 $ $1,157,846 $2,912,679 $644,822 $2.64 FY2017E 2,577,425 $ $1,177,904 $3,101,585 $712,972 $3.10 Source: Company filings, Stephens Inc. estimates U.S. Revenue Source (FY 15) U.K. Revenue Source (FY 15) Outpatient 3% RTC 16% Specialty Treatment 41% Acute Inpatient 40% Elderly Care Facilities 9% Adult Care Facilities 13% Education and children's services 13% Healthcare facilities 65% Source: Company filings Valuation (EV/EBITDA) 19.0X 17.0X 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 22

23 Adeptus Health Inc. (ADPT) $63/OW (Vol.) Adeptus Health Inc. operates over 70 freestanding emergency departments in multiple states including Texas, Colorado and Arizona. Investment Thesis and Valuation Catalysts - what could get this stock working again?: ADPT shares have considerable short interest (50%+ of the float) and the 2Q results likely did little to scare the shorts away. Unfortunately, we see few near-term catalysts until possibly 3Q results, but more likely 4Q results. We expect 3Q adj. EBITDA to be up slightly from 2Q, putting a lot of pressure to deliver strong 4Q profitability. However, if we see 3Q DSOs tick down, good operating cash flow and maintained guidance expect some short covering and multiple expansion to drive the stock higher. But, the year remains heavily weighted to 4Q16 results, during which we estimate ADPT generates ~37% of full year adj. EBITDA. Given lack of visibility into patient flow, particularly for FSED's, we expect investors to remain cautious until 4Q results are reported likely in February CEO Transition: CEO and Chairman, Tom Hall, intends to retire mid-2017 or upon the appointment of a successor. The Company has established a search committee, with plans to retain a leading executive search firm to assist in the process. We believe investors would like to see the appointment of a CEO with an operational focus and in building healthcare system partnerships, as Adeptus's growth trajectory, while still exceptional, begins to mature. Valuation: Our $63 PT is based on 10x our 2017 EBITDA. Driver Systemwide Revenue EBITDA Patient Volume Facility Count Rev/Patient $ thousands $ thousands Adj. EPS 3Q2015A 60, $ 1, $109,038 $ 18,641 $0.31 3Q2016E 96, $ 1, $155,337 $ 25,400 $0.60 FY2014A 145, $ 1, $210,694 $28,178 $0.04 FY2015A 244, $ 1, $425,261 $75,910 $1.37 FY2016E 400, $ 1, $639,234 $110,173 $2.53 FY2017E 520, $ 1, $835,538 $145,066 $3.38 Source: Company filings, Stephens Inc. estimates 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0%) (10.0%) (15.0%) Same Store Growth 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Source: Company filings SS Revenue Growth Valuation (EV/EBITDA) SS Volume Growth 30.0X 25.0X 20.0X 15.0X 10.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 23

24 Hanger Inc.(OTC: HNGR) $NE/EW (Vol.) Hanger Inc., headquartered in Austin, TX, is the leading provider of Orthotics and Prosthetics services in the U.S. Investment Thesis and Valuation Dominant market share in O&P industry with above average growth: Hanger had averaged 4.5% organic growth since 2007, which is above the industry average of 2%-3%. Coupled with acquisitions, growth in ancillary segments and modest margin expansion, Hanger had been a consistent mid-teens profit growth company. Accounting: Hanger now believes it will not be a current filer prior to the fourth quarter of Hanger has found evidence of "inappropriate activities" by former employees that contributed to prior financial statements. Results: Hanger disclosed a summarized cash flow statement for FY2015. Hanger generated $53 million of CFO vs. $52 million in CapEx was $29 million in Backing out $25 million of cash flow expenditures related to the accounting review, we estimate that Hanger generated ~$49 million of free cash flow to equity shareholders. We estimate 2015 adjusted EBITDA at ~$145 million, which includes $26 million of cash interest, $18 million in cash taxes, $25 million of nonrecurring 3rd party fees, and ~$25 million of working capital. Drivers Revenues EBITDA SS Revenue P&S Revenue Acquired Revenue $ thousands $ thousands $ Adj. EPS 4Q2014 $228,549 $47,594 $12,000 $288,143 $53,306 $0.61 4Q2015E $245,360 $49,022 $12,500 $306,882 $62,736 $0.77 FY2014 $853,313 $173,927 $44,600 $1,071,840 $164,044 $1.62 FY2015E $915,871 $179,144 $50,000 $1,145,016 $181,497 $1.86 Source: Company filings and Stephens Inc. estimates Bull Case HNGR becomes a current filer: HNGR hasn t been a current filer since 2Q2014. This has kept many investors out of the name. If HNGR can begin filing in 2016, we suspect many investors can at least begin looking at the name again. Bear Case Filing delay continues: Accounting issues persist, further delaying SEC filing. DMEPOS regulation: New rules regarding Medicare reimbursement requirements for prosthetics could prove difficult or, at the very least, could make operations more complex. Valuation (EV/EBITDA) 10.0X 9.0X 8.0X 7.0X 6.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 24

25 U.S. Physical Therapy, Inc. (USPH) $58/EW (Vol.) U.S. Physical Therapy is the third-largest physical therapy operator in the U.S. and is the only publicly-traded pure-play provider of physical therapy services. Investment Thesis and Valuation Unique partnership model drives long-term growth: We expect USPH to generate organic growth of ~2% - 3%, driven by its unique partnership model that incentivizes partners to drive continuous growth as they share significantly in the upside via a 20% - 35% ownership share. Acquisitions/de novos: USPH did not complete any deals in the second quarter. This followed the first quarter where the Company completed ~$12 million of M&A, adding 99,000 annualized visits (3.5% of 2015's total visits) through 2 deals. They continue to look at larger deals, like the STAR deal they completed in 2007, though they often are priced out of these deals. The balance sheet is in great shape with 27.6 million of net debt, leaving the Company ~0.5x levered with plenty of capacity to acquire additional operations. Better entry point?: Given strong free cash, excellent balance sheet, and fairly easy comps in 2016, we think USPH is a safe haven stock and likely keeps a premium valuation. Should shares start to slide to the mid-$40 range or lower, we think this provides a better entry point for investors. Valuation: Our $58 PT is based on 13x our 2017 EBITDA estimate. Drivers Revenues EBITDA Patient Visits Revenue/Visit $ thousands $ thousands Adj. EPS 3Q2015A 782,100 $ $84,049 $12,847 $0.47 3Q2016E 836,200 $ $89,824 $13,088 $0.48 FY2014A 2,819,000 $ $305,074 $46,300 $1.71 FY2015A 3,080,200 $ $331,302 $50,325 $1.80 FY2016E 3,326,494 $ $357,607 $55,273 $1.99 FY2017E 3,476,704 $ $375,457 $58,617 $2.17 Source: Company filings, Stephens Inc. estimates 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (1.0%) (2.0%) (3.0%) Same Store Revenue Growth 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Source: Company filings SS Revenue Growth Valuation (EV/EBITDA) 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 25

26 Post-Acute & Senior Living Facilities Mkt Cap Ent Value Shares Target Price Avg. Daily Short Price / Earnings EV/EBITDA Leverage Company Symbol Rating (MM) (MM) Out (MM) Price 22-Sep-16 Volume Interest Float Post-Acute and Seniro Living Facilities Addus HomeCare ADUS OW $ 296 $ $ $ , % 96.5% 20.7x 18.5x 18.5x 8.0x 1.7x 1.3x Amedisys AMED EW (Vol) $ 1,660 $ 1, $ $ , % 97.5% 29.8x 24.0x 24.0x 12.4x 0.8x 0.8x LHC Group LHCG OW (Vol) $ 686 $ $ $ , % 88.6% 18.9x 19.7x 19.7x 10.4x 1.6x 1.4x BioScrip Inc BIOS OW (Vol) $ 323 $ $ 3.25 $ , % 97.8% NA NA NA 13.2x 28.8x 10.2x Brookdale Senior Living Inc. BKD OW (Vol) $ 3,341 $ 13, $ $ ,976, % 98.2% 7.1x 6.8x 6.8x 10.3x 8.2x 8.1x Capital Senior Living Corp CSU OW (Vol) $ 522 $ 1, $ $ , % 93.0% 9.8x 8.4x 8.4x 11.8x 10.2x 9.5x Ensign Group Inc. ENSG OW (Vol) $ 1,081 $ 2, $ $ , % 93.5% 16.0x 13.5x 13.5x 7.3x 5.3x 4.3x Genesis Healthcare GEN EW (Vol) $ 431 $ 5, $ 2.50 $ , % 55.5% NA NA NA 7.4x 7.0x 7.1x Source: Factset Research Systems, Stephens Inc. 26

27 Post-Acute Care Settings The Post-Acute Care Continuum Post-acute care (PAC) providers offer recuperation and rehabilitation services after an acute hospital stay. 42% of Medicare beneficiaries are discharged from hospitals to one of 29,000 PAC providers. Represented 9% (excluding Hospice) of Medicare s $619 billion spend in Highest Acuity Lowest Acuity Acute Care Facility Long-Term Acute Care Hospital Hospice Inpatient Rehabilitation Facility Skilled Nursing Facility Home Health Description LTAC - IRF SNF HHA Care provided for patients with serious medical problems who require intense treatment. Care provided for terminallyill patients. Therapy services provided after a hospital stay in a specialized facility. Therapy given in an inpatient setting with nurse oversight. Can include rehabilitation. Nursing services provided at home Medicare Spending ($B) $5.5 $15.1 $7.0 $27.0 $17.7 Discharges 134,000 1,300, ,000 2,344,173 3,400,000 Providers 422 3,925 1,177 15,005 12,461 Facility Ownership Mix For-Profit (77%) Non-Profit (19%) Govt. (4%) For-Profit (61%) Non-Profit (33%) Govt. (6%) For-Profit (29%) Non-Profit (58%) Govt. (13%) For-Profit (70%) Non-Profit (25%) Govt. (5%) For-Profit (89%) Non-Profit (11%) Govt. (0%) Hospital vs. Freestanding Free-Standing (62%) Hospital-Based (38%) Free-Standing (72%) Hospital-Based (15%) Home-Based/SNF (13%) Free-Standing (21%) Hospital-Based (79%) Free-Standing (95%) Hospital-Based (5%) N/A Payment Length Up to 90 days 90-day periods Up to 90 days Up to 100 days 60-day episodes Avg. Length of Stay <100 N/A Base Payment $41,044/episode $165 - $930/day $15,198/episode $86 - $169/day $2,869/episode Patients First Site after Acute 2% 0% 20% 41% 37% Source: MedPAC, HealthSouth, Kindred Healthcare, RTI 27

28 Winners and Losers Impact on Segments Home Health: We believe home health will be the biggest winner in PAC reform. The home is the cheapest place to treat patients and as technologies allow, more patients will be seen there. Inpatient Rehab: We expect a modest shift in joint replacements patients from the IRFs to SNFs, but not to any meaningful extent. Joint replacements represent less than 9% of IRF cases compared to 24% in 2003 so most of those cases more appropriate for the SNF have already transitioned. Skilled Nursing: The SNF sector should benefit modestly from a pick up in volume from the IRF/LTAC settings, but not likely enough to offset increased pressure on utilization by both managed care and Medicare FFS as well as a loss of patients to home health. LTAC: LTACs are the highest cost PAC facility. Recent changes to LTAC patient criteria should further shrink the industry and less expensive SNF step down units may siphon more vent patients going forward. 28

29 Amedisys Inc. (AMED) $55 PT/ EW(Vol.) Amedisys (AMED) is a leading home health and hospice care company focused on bringing home the continuum of care. The Company is a post-acute care partner to more than 2,233 hospitals and 61,900 physicians across the country. Investment Thesis and Valuation Low Cost PAC Provider Drives Significant Organic Volume Growth Potential: As healthcare reimbursement moves to value-based payments, we believe the home health industry, as a low cost and consumer-friendly model, should take share from other post-acute providers. We estimate that AMED can generate mid-single-digit Medicare volume growth and high-singledigit to low double-digit Non-Medicare growth, which should result in mid- to high-single-digit organic growth in the home health segment. Revamped Management Team Brings Hefty Dose of Accountability; Likely Driver of Premium Multiple: We are impressed with the level of talent that has been assembled at the executive level over the last couple of years and expect that deep managed care experience serves Amedisys well as more reimbursement moves to value-based. Balance Sheet Supports Meaningful M&A Opportunities: AMED s balance sheet is in good shape, at ~1.1x levered. We believe the Company could comfortably go to 3.0x debt/ebitda. Assuming ~$120 million of 2016 EBITDA, this would add $32 million - $51 million of EBITDA based on EV/EBITDA multiple from 5x 8x. This would be 26%-42% accretive to EBITDA. Valuation and Price Target: AMED is well positioned in the post-acute industry as the low cost provider and we are confident that the Company has the right management team to deliver on the margin improvement initiatives and the M&A pipeline. But, with the stock up trading at peak valuation multiples, we believe shares are fairly priced. Our PT is based on ~12.5x 2017 EBITDA. Should shares pull back to the mid-$40s, we would get more constructive. Medicare HH Medicare HH Hospice Average Daily Revenues Adj. EBITDA Adj. Episodes Growth Revenue/Episode Growth Census Growth $ Thousands $ Thousands EPS 3Q2015A 0.0% 1.6% 16.0% $326,450 $26,368 $ Q2016A 11.0% -0.5% 8.0% $359,128 $30,061 $ 0.42 FY2014A -6.7% 0.4% -7.0% $1,204,554 $74,278 $ 0.73 FY2015A -0.9% -0.1% 10.5% $1,280,541 $111,966 $ 1.48 FY2016E 9.9% 0.0% 12.0% $1,433,258 $117,205 $ 1.66 FY2017E 5.5% -2.7% 7.0% $1,497,586 $142,329 $ 2.06 Source: Company filings, Stephens Inc. Hospice Non- Medicare 1% Home Health Non-Medicare 19% Business Mix (FY 15) Hospice Medicare 20% Home Health Medicare 60% Source: Company filings Valuation (EV/EBITDA) 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 3.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 29

30 LHC Group (LHCG) $50 PT/OW(Vol.) LHC Group is a post-acute care partner for hospitals, physicians and families nationwide with 10,000 employees in 25 states. The Company provides home health, hospice care, long-term acute care and community-based services. Investment Thesis and Valuation Unique Partnership Model Should Drive Additional Volumes From Hospital: LHCG has a unique partnership model where they enter into joint ventures with hospital or health systems partners. While hospital partners cannot simply funnel patients LHCG s way, we believe these partnerships do result in a superior organic growth profile. In addition, the experience of coordinating with health systems should enable LHCG to thrive in a rapidly changing payment environment where post-acute providers must work in tandem with hospitals to optimize quality while controlling costs. Solid management team provides excellent visibility and has plenty of skin in the game: The LHCG management team has consistently maintained a prudent balance which has served shareholders well particularly through significant industry challenges. The Company has beat consensus revenue and EPS estimates in each of the last 8 quarters. Also, we are encouraged by management and director beneficial ownership at over 18% of shares outstanding. Balance Sheet Supports M&A Activity: LHCG has both the balance sheet and appetite to drive meaningful EBITDA growth with its current balance sheet. The Company has identified a pipeline of ~$950 million in potential deal revenue. The balance sheet is in good shape sub-2x levered and the Company should be able to generate $25+ million in free cash flow to equity. We expect LHCG to acquire ~$120 million annually in revenue which we estimate could add $0.24-$0.37 in annualized EPS, or 12%-18% of our 2016 estimate. Valuation and Price Target: We use multiple valuation methodologies to arrive at a $50 price target. Medicare HH Visit Medicare HH Revenue/Visit Hospice Patient Day Revenues Adj. EBITDA - NCI Adj. Growth Growth Growth $ Thousands $ Thousands EPS 3Q2015A 6.5% 1.1% 10.0% $204,122 $18,311 $ Q2016E 6.0% -2.0% 60.0% $220,772 $19,163 $ 0.51 FY2014A 7.6% -1.4% 17.5% $733,632 $51,947 $ 1.26 FY2015A 6.7% -0.5% 24.7% $816,366 $70,365 $ 1.94 FY2016E 7.8% 1.4% 49.4% $894,545 $76,838 $ 2.00 FY2017E 8.0% -2.0% 10.0% $949,961 $74,403 $ 1.92 Source: Company filings, Stephens Inc. Communitybased services 5% Hospice services 11% Business Mix (FY 15) Facility-based services 9% Home Health 75% Source: Company filings Valuation (EV/EBITDA) 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 3.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 30

31 Addus HomeCare Corp. (ADUS) $26/OW Addus HomeCare Corp. provides comprehensive home and community-based care primarily to dual-eligible beneficiaries. The Company provides these personal care services to over 32,000 consumers from over 122 offices in 21 states. Investment Thesis and Valuation Sharper focus could boost organic growth: ADUS believes that it can do a better job narrowing the gap between authorized hours and hours billed. Investments in a business intelligence platform should help better identify the best opportunities, daily communications with agency directors, and changes to incentive comp that focuses on billable hours as opposed to census should keep this as a high company priority. As with most healthcare services industries, ADUS views the market growth in the 3%-5% range, but we think that could be slightly elevated in the near term if it can capture more of its authorized hours. Margin expected to expand this year and next: In sharp contrast to previous leadership, ADUS is keenly focused on improving EBITDA margins and, as outlined earlier this year, has already identified $4.1 million in cost savings, or ~100 bps of margin. We expect the full run rate to be realized by the end of the year which should push margins over 8% exiting The Company appears confident that there are more savings in 2017 and feel that a 10% margin is feasible as it exits next year. Clean balance sheet: Assuming ADUS collects the remaining balance on Illinois receivable, the Company is in a net cash position of over $30 million leaving plenty of dry powder. ADUS has a $100 million revolver at its disposal and indicated comfort at 3x levered. Valuation: Our $26 PT is based on 8x 2017 EBITDA. Ohio 3% California 3% Washington 5% Drivers Revenue EBITDA Census Billable Hours Billable Rate $ thousands $ thousands Op. EPS 3Q2015A 32,407 4,860 $17.35 $84,331 $5,950 $ Q2016E 34,675 5,877 $17.32 $101,771 $7,727 $ 0.32 FY2014A 31,033 18,335 $17.07 $312,942 $23,761 $ 1.14 FY2015A 32,807 19,555 $17.22 $336,815 $23,627 $ 1.09 FY2016E 34,339 22,971 $17.32 $397,739 $29,850 $ 1.25 FY2017E 36,312 24,404 $17.32 $422,583 $32,794 $ 1.40 Source: Company Filings, Stephens Inc. estimates New Mexico 9% State Exposure (FY 15) Payor Mix (FY 15) All others 21% Illinois 59% Commercial 1% Private Duty 3% Managed care 24% State, local and Other Gov't 72% Source: Company filings Valuation (EV/EBITDA) 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 3.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 31

32 The Ensign Group (ENSG) $26/OW (Vol.) Headquartered in Mission Viejo, CA, Ensign is one of the largest operators of skilled nursing facilities in the country. The Company also provides ancillary services, including home health and hospice care. Investment Thesis and Valuation Good growth story deserves higher valuation: ENSG has been averaging mid-single digit organic revenue growth over the last few years including 6.3% in 2Q. Adjusted EBITDAR increased 39% in 2015, and we estimate 22% growth this year and 12% in 2017 excluding future acquisitions. The Company has guided to 2017 adj. EPS growth of 20% at the midpoint. Yet, shares trade at ~7x forward EBITDAR (~7x forward EBITDA) and ~13x forward EPS. Assuming the issues identified in 2Q are resolved this year, we expect the multiple to expand even with negative sentiment on the SNF industry persisting. Further, with the balance sheet modestly levered at ~4x on a lease adjusted basis, ENSG is in a good position to drive consensus estimates higher through acquisitions. Legends portfolio, HR system roll-out disruptions in 2Q16 minimized into 3Q: ENSG lowered 2016 adjusted EPS citing a number of "small deficiencies" including challenges at the largest acquisition completed by ENSG (18-facility Legend's portfolio) as well as the company wide roll-out of a new HR/labor management software system. Both issues have stabilized into 3Q so we expect that ENSG is on pace to hit the revised annual guidance. ENSG continues to believe the Legend s team has a very similar culture to the ENSG culture. However, a few slight differences (less focus on staffing levels, more centralized management) led to some initial struggles. Valuation: Our $26 PT is based on 8x our 2017 EBITDAR. SNF SNF Revenues EBITDA Occupancy Patient Days Rev/Day $ thousands $ thousands Adj. EPS 3Q2015A 77.9% 1,037,210 $ $351,086 $33,074 $0.30 3Q2016E 75.5% 1,213,198 $ $426,211 $36,681 $0.30 FY2014A 78.0% 3,396,553 $ $1,027,406 $112,431 $1.09 FY2015A 78.0% 3,975,839 $ $1,341,826 $135,245 $1.27 FY2016E 76.4% 4,689,251 $ $1,656,708 $154,974 $1.34 FY2017E 76.2% 5,009,372 $ $1,813,797 $175,170 $1.59 Source: Company Filings, Stephens Inc. estimates Medicaid 56% Skilled Mix (2Q16) Medicare 15% Managed Care 12% Other Skilled 5% 31.3% Skilled Mix Source: Company filings Private and other 12% Valuation (EV/EBITDA) 10.0X 9.0X 8.0X 7.0X 6.0X 5.0X 4.0X 3.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 32

33 Genesis Healthcare (GEN) $2.50/EW (Vol). Investment Thesis and Valuation Improved capital structure paves way for better operating results: With the capital structure in a better place following the recent refinancing of a term loan, restructuring of Sabra leases, more flexible financial covenants, and favorable DOJ settlement terms, GEN stock finally seems to be shaking solvency concerns as it has basically doubled from June lows. The next catalyst besides showing solid quarterly results is the potential to restructure the Welltower (HCN, OW) leases which represent just under $300 million in annual rent. This should help leverage, which on a lease adjusted basis we estimate at over 7x on 2016 adj. EBITDAR. Genesis Physician Services (GPS) creates strategic, financial advantage: While SNF utilization remains pressured from managed care, bundled payments, CCJR, and other payment reforms, the Company believes its 400-clinician GPS segment creates significant value and benefits from the BPCI and shared savings MSSP initiatives. We think having an employed clinical presence in the facility is a strategic advantage as it better aligns incentives with healthcare systems to provide higher quality care to improve patient outcomes and avoid costly re-admissions. Further, it allows GEN to participate in the MSSP which has potential financial incentives. GPS unit manages ~$800 million of Medicare spend in these ACOs. In order to receive a bonus payment, GEN must generate 3% of savings, which then enables them to share in 50% of the shared savings from the first dollar. Assuming the Company can generate 6% savings, then GEN would receive $800 million x (6%-3%) x 50% economics = $12 million of annual bonus payments. We do not expect to see any financial impact until 2H17 at the earliest however. Valuation: We believe the stock is relatively cheap at ~7x 2016 and ~6.5x What will ultimately drive the share price, though, is more consistent results. We believe the balance sheet issues have been a distraction so are hopeful that this overhang's removal correlates to better operating results. Our $2.50 PT is 6.25x 2017 EBITDAR. Revenue EBITDA Occupancy Patient Days Rev/Day $ thousands $ thousands EPS 3Q2015A 86.0% 4,324,403 $266 $1,416,027 $67,205 -$0.32 3Q2016E 84.0% 4,352,410 $279 $1,386,050 $44,946 ($0.31) FY2014A 89.2% 14,679,338 $270 $5,585,017 $215,323 NA FY2015A 86.8% 17,061,645 $285 $5,619,224 $249,665 ($4.97) FY2016E 85.2% 17,547,919 $284 $5,712,875 $218,172 ($1.29) FY2017E 85.0% 17,466,860 $288 $5,746,017 $234,464 ($0.81) Source: Company filings, Stephens Inc. estimates Skilled Mix (2Q16) Medicaid 73% Medicare 13% Insurance 7% Private and other 7% Source: Company filings Valuation (EV/EBITDA) 22.0X 17.0X 12.0X 7.0X 2.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 33

34 BioScrip, Inc. (BIOS) $3.25/OW (Vol.) BioScrip, Inc. is focused on providing home and alternate site infusion therapy via its platform of infusion pharmacies. Investment Thesis and Valuation 2016 adj. EBITDA guidance lowered, but 2017 outlook still positive: BIOS increased the 2016 revenue guidance to $940 million -$960 million from $875 million - $900 million to reflect expected revenue from Home Solutions which is expected to close in September. BIOS lowered adj. EBITDA to $45 million -$50 million from $50 million -$60 million. The Company noted that it now expects to realize ~$7 million less in savings from the announced Financial Improvement Plan as resources were allocated to the Home Solutions deal. Still, BIOS expects that it exits the year at an adj. EBITDA run rate in the mid-$60 million range. This does not include fully realizing the $7 million mentioned above and only a "small portion" of the $14 million -$17 million in deal synergies. As a reminder, deal synergies are expected to be realized within months and include: ~$8 million of corporate redundancies; ~$3 million in supply chain savings; and $3 million - $6 million in the seven markets in which the combined companies overlap. Pro-Forma Valuation: We summarize the valuation range in the table to the right. Assuming 5% revenue growth in for Home Solutions, 6.2% EBITDA margins (our estimate for BIOS in 2017), and $15.5 million of synergies we believe the Company can generate $79.1 million of annualized EBITDA. Assuming a multiple range of 10x-12x adj. EBITDA implies a share price range of $2.60-$3.86 with a $3.23 midpoint. This reduces leverage from ~7.2x our current estimates to ~5.2x on a pro forma basis. Valuation: Our $3.25 PT is based on 14x our 2016 EBITDA. Revenue EBITDA Infusion Y/Y growth $ thousands $ thousands Adj. EPS 3Q2105A 6.8% $247,224 $6,238 ($0.38) 3Q2016E 5.0% $223,335 $12,220 ($0.04) FY2014A 32.3% $922,654 ($36,090) ($1.30) FY2015A 6.5% $982,223 $15,864 ($0.68) FY2016E -6.7% $916,941 $44,858 ($0.20) FY2017E -0.9% $908,619 $55,899 ($0.05) Source: Company filings, Stephens Inc. estimates Pro Forma Valuation Equity Offering 2017 BIOS Revenues $908,619 Cash consideration $67,500 Home Solutions Revenues $120,173 Price $2.00 Total $1,028,792 Shares 45,200 EBITDA (6.2% margin) $63,785 Gross Proceeds $90,400 Synergies $15,500 Broker fees $7,250 Total EBITDA $79,285 Net Proceeds $83,150 Multiple 11.0x Prior Shares 69,321 Secondary 45,200 EV $872,136 Deal stock 3,750 Less: Debt $423,929 RSUs 7,100 Less: preferred stock 67,317 Plus: Cash $67,075 Diluted Shares* 125,371 Less: Home Solutions Cash Payment $67,500 Estimated Equity Value $380,465 Shares $3.03 Source: Company filings, Stephens Inc. estimates Valuation (EV/EBITDA) 19.0X 17.0X 15.0X 13.0X 11.0X 9.0X 7.0X 5.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Avg. 34

35 Looking Forward: Senior Housing Supply & Demand Demand: We believe there are two main drivers of the demand for senior living: the population of 80+ persons and the availability of caretakers. Based solely on the increase in the population of those 80+ and assuming a constant penetration rate (occupied senior living units as a % of 80+ year old population) of 11%, the demand for senior living units will increase to 3.1 million. At the same time the caregiver ratio will be more than cut in half from 6.9:1 in 2015 to 3.2:1 in We could assume a 10 bps annual increase in the penetration rate, which is not unreasonable given penetration rates were 8.8% in In this scenario, the demand for senior living units would be 3.9 million in Current Supply: According to NIC, there are currently 1.4 million senior housing units in the U.S., including those under construction. Need: To meet the 2040 projected based case demand of 3.1 million units below, 1.6 million senior living units must be built over the next 25 years. If we assume a 10 bps annual increase in penetration, then the new construction requirement grows to 2.4 million units. Takeaway: While new supply should concern investors in the near term, it is a drop in the bucket compared to what the U.S. will require over the coming decades. 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 To meet 2040 demand, 1.6 million senior living units must be built over the next 25 years. 1,000, Demand Assuming 10 bps annual increase in pentration Current Supply + Construction Demand Assuming Constant Penetration Rate of Seniors Source: U.S. Census Bureau, NIC, Stephens Inc., ASHA 35

36 Brookdale Senior Living (BKD) $23/OW (Vol.) Brookdale Senior Living, headquartered in Brentwood, TN, is the largest operator of senior housing communities in the United States. Investment Thesis and Valuation 3% revenue growth = 10% EBITDA growth = 99% CFFO growth: BKD remains focused on its plan for 3% revenue CAGR, 10% EBITDA CAGR, and 99% CFFO CAGR through The largest drivers behind the 10% CAGR in EBITDA are simplification efforts and ~$25 million in G&A savings. BKD is working to flatten its corporate structure, simplify processes, and most importantly, reduce the workload on their three most important community level employees the executive director, sales director, and health & wellness director. The largest driver behind the 99% growth of annual CFFO growth is reduced CapEx spend. BKD believes it can reduce CapEx by $150 million annually as they complete efforts to renovate legacy Emeritus assets. We continue to target ~$2.30 in 2018 CFFO (after all capex) implying an attractive 12.5% cash flow yield at the current share price. Deleveraging remains priority for excess cash: BKD targets leverage reduction of 1x by 2018 with 0.5x in We estimate that the announced sale of 44 communities for gross proceeds of $252.5 million reduces leverage by ~0.2x alone. So additional asset sale announcements as well as the 25 facilities leased from HCP Inc. (HCP, NC) that BKD is looking to exit, with what we believe to be minimal EBITDAR contribution, should push BKD toward their target. As the cash flow improves and the balance sheet modestly de-levers, BKD should have ample cash to distribute to shareholders through share repurchases and/or dividends. Valuation: Our $23 PT is 9x our 2016 CFFO estimate. To the extent BKD can track to the $2.30 CFFO/share in 2018, the shares are significantly undervalued. Assuming a 75% payout ratio and 5% dividend rate, shares would be in the mid-$30's. Driver Revenue EBITDA Avg. Occupancy Avg. Rent $ thousands $ thousands CFFO 3Q2015A 86.7% $4,304 $1,238,841 $173,537 $0.60 3Q2016E 86.1% $4,451 $1,254,492 $210,888 $0.64 FY2014A 88.3% $4,388 $3,831,706 $537,578 $2.50 FY2015A 86.8% $4,314 $4,960,608 $734,921 $2.42 FY2016E 86.1% $4,473 $5,013,161 $810,458 $2.54 FY2017E 86.4% $4,604 $5,093,095 $877,728 $2.66 Source: Company filings, Stephens Inc. estimates Cash Flow Ex E 2017E 2018E Adj. CFFO $444,219 $472,418 $497,139 $536,910 Adj. CFFO/Per Share $ 2.42 $ 2.54 $ 2.66 $2.88 Y/Y Growth -3.3% 5.1% 4.7% 8.0% Recurring CapEx (included in CFFO) 60,937 67,283 80,668 67,520 Per unit , Community Growth CapEx 179, , ,033 70,000 Per unit 2,183 1,698 1, Development CapEx 37,428 26,722 32,000 - Corporate CapEx 83,832 60,616 36,000 35,000 Total 300, , , ,000 CFFO less non-development CapEx 180, , , ,910 CFFO less non-development CapEx/share $0.98 $1.48 $1.66 $2.31 Shares 184, , , ,725 Units 82,340 80,770 80,668 80,000 Note: 2018 CFFO estimate assume 8% growth Y/Y, along with the midpoint CapEx guidance from the company. Source: Stephens Inc. Valuation (P/CFFO) 14.0X 12.0X 10.0X 8.0X 6.0X 4.0X Source: Factset Research Systems 1-Year Current 3-Year Average 5-Year 36

37 Capital Senior Living (CSU) $25/OW (Vol.) Capital Senior Living is a leading operator of seniors housing communities with more than 115 properties and capacity for over 15,000 residents. Investment Thesis and Valuation Near-term moving parts mask potential future cash flow generation: There are several moving parts with unit conversions, re-positioned assets, and elevated capex through 2017 that somewhat mask the future cash flow growth potential of the Company. The Company updated its corporate presentation which includes additional detail on the timing of re-positioned assets coming back on-line. The 745 units are expected to come on-line in stages through 3Q17 and we estimate are fully leased up through 1H18. Assuming these 745 units lease up to 90% occupancy at a company average of $3,500/month in rent, we estimate an incremental $28.2 million in annual rent, $10.7 million in annualized EBITDAR (38% NOI margin), and $6.6 million in CFFO (~$0.24/share). This is likely understated as the repositioned units should carry higher than average monthly rents. Elevated capex should tail off into 2H17: With the asset re-positioning, CSU has experienced higher levels of total capex. This included over $40 million in 2015 and over $60 million in 2016 ($50 million net of landlord reimbursement). We expect ~$30 million in 2017 which should normalize into 2H to an annualized $18 million - $20 million. Valuation: Our $25 PT is based on 13x our 2016 CFFO estimate. Drivers Revenue EBITDA Avg. Occupancy Avg. Rent $ thousands $ thousands CFFO 3Q2015A 88.9% $3,382 $104,420 $21,101 $0.42 3Q2016E 88.8% $3,483 $112,983 $21,906 $0.42 FY2014A 87.6% $3,181 $383,925 $73,268 $1.51 FY2015A 88.4% $3,369 $412,177 $83,245 $1.64 FY2016E 88.8% $3,485 $449,555 $91,967 $1.77 FY2017E 89.2% $3,624 $486,896 $100,935 $2.06 Source: Company Filings, Stephens Inc. Estimates Company Statistics Same-Facility 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Occupancy 87.1% 87.8% 88.6% 88.9% 88.5% 88.6% Occupancy Growth (0.3%) 0.4% 1.2% 0.5% 1.1% 0.5% Rate $ 3,271 $ 3,327 $ 3,338 $ 3,393 $ 3,399 $ 3,426 Rate Growth 1.8% 2.5% 1.8% 2.6% 2.3% 3.1% NOI Growth 2.2% 4.8% 1.9% 0.5% 3.8% 1.8% Consolidated 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Units 10,918 10,974 11,051 11,212 11,438 11,576 Occupancy 87.3% 88.0% 88.9% 89.2% 88.6% 88.4% Rate $ 3,293 $ 3,364 $ 3,382 $ 3,436 $ 3,443 $ 3,473 Operating margin 46.1% 41.4% 46.3% 45.7% 40.4% 40.8% % Owned Revenue 53.7% 54.8% 55.8% 57.3% 57.9% 58.3% % Leased Revenue 46.3% 45.2% 44.2% 42.7% 42.1% 41.7% % IL Units 49.4% 47.9% 46.8% 45.5% 44.2% 43.5% % AL Units 50.6% 52.1% 53.2% 54.5% 55.8% 56.5% % CCRC 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Source: Company Filings Valuation (P/CFFO) 21.0X 19.0X 17.0X 15.0X 13.0X 11.0X 9.0X 7.0X 1-Year 3-Year 5-Year Source: Factset Research Systems Current Average 37

38 Healthcare REIT Comps Table Mkt Cap EV Shares Target Price FFO P/FFO EBITDA (MM) EV/EBITDA Leverage Dividend Company Symbol Rating (MM) (MM) Out (MM) Price 30-Sep E 2017E E 2017E Rate Care Capital Partners CCP OW $2,392 $3, $33.00 $28.50 $2.95 $ x 10.0x $304 $ x 12.5x 4.8x 7.3% CareTrust REIT, Inc. CTRE OW $856 $1, $16.00 $14.78 $1.09 $ x 12.3x $85 $ x 13.3x 5.0x 4.6% Community Healthcare Trust, Inc. CHCT NC $285 $ NA $21.92 $1.41 $ x 13.3x $16 $ x 9.7x 0.0x 6.7% HCP Inc HCP NC $17,745 $27, NA $37.95 $2.82 $ x 13.8x $1,743 $1, x 16.4x 5.9x 5.8% Healthcare Realty Trust Inc. HR NC $3,946 $5, NA $34.06 $1.65 $ x 19.6x $235 $ x 20.4x 5.2x 3.4% Welltower, Inc HCN OW $26,761 $38, $86.00 $74.77 $4.57 $ x 15.9x $2,283 $2, x 16.4x 5.6x 4.4% LTC Properties Inc. LTC NC $2,039 $2, NA $51.99 $3.06 $ x 16.2x $141 $ x 16.9x 4.3x 4.0% Medical Properties Trust MPW NC $4,618 $7, NA $14.77 $1.30 $ x 11.1x $462 $ x 14.3x 5.7x 6.1% National Health Investors NHI OW $3,073 $4, $84.00 $78.48 $4.88 $ x 15.3x $235 $ x 16.7x 4.6x 4.4% New Senior Investment Group SNR NC $948 $3, NA $11.54 $1.35 $ x 8.1x $200 $ x 14.6x 10.8x 8.6% Omega Healthcare Investors OHI NC $6,858 $10, NA $35.45 $3.32 $ x 10.4x $812 $ x 12.6x 5.1x 6.4% Physicians Realty Trust DOC NC $2,899 $3, NA $21.54 $1.04 $ x 17.1x $150 $ x 15.8x 4.2x 4.1% Sabra Health Care REIT SBRA NC $1,644 $2, NA $25.18 $2.26 $ x 10.8x $227 $ x 11.6x 5.3x 6.4% Seniors Housing Property Trust SNH NC $5,393 $9, NA $22.71 $1.89 $ x 12.0x $610 $ x 14.6x 6.0x 6.6% Ventas, Inc. VTR NC $24,816 $35, NA $70.63 $4.12 $ x 16.3x $1,850 $1, x 17.9x 5.9x 4.0% Healthcare REIT Average 14.3x 13.5x 16.6x 14.9x 5.2x 5.5% Source: Stephens Inc. for companies in bold, non-covered company estimates courtesy of FactSet Research Systems 38

39 Diversified in Secondary Markets The Bellwether SNF-Focused Spin Offs Healthcare REIT Comps Table CCP OW, $33 PT Since its spin-off from Ventas just over a year ago, the Company has moved to a more permanent capital structure while building the corporate infrastructure necessary for a publicly traded REIT. With these accomplishments, CCP is in a better position to start growing the Company externally. CCP currently has over $500 million available on the revolver, providing plenty of dry powder to fund growth. Given the highly fragmented SNF industry and stable bench of operators, CCP should be able to deploy capital approximating 10% of its gross asset value annually. We estimate that this translates to mid-teens TSR over the next several years. CTRE OW, $16 PT Since the spin in mid-2014, CTRE has moved quickly to diversify its tenant base from 1, Ensign (ENSG, OW/Vol), to 15 while reducing ENSG's revenue contribution to ~56%. The management team has operator experience, which we believe is critical in fostering new relationships, particularly in the challenging SNF industry. We like CTRE's relative small size, which results in outpaced growth even on a pipeline built largely on smaller deals. Further, we think smaller deals provide better initial cash acquisition yields (9%+ in SNF, 8%+ SH/ALF) with still comfortable coverage ratios. CTRE's industry low payout ratio allows for more internally funded M&A while providing an avenue for future dividend growth. HCN OW, $86 PT We view Welltower as the bellwether healthcare REIT given its leading market share of class A real estate in the largest MSAs, consistent record of outperformance in the SHOP SS NOI, clean balance sheet/low cost of capital, consistent dividend growth, and strong operator relationships with comfortable coverage. With the GEN refinancing complete, we expect that Welltower will be able to divest itself of much of the PAC portfolio at an attractive price. We initiated coverage with an Overweight rating and $86 price target. NHI OW, $84 PT Since the Board decided to pursue a longer-term growth strategy in 2010, NHI has increased its gross asset value by ~10.5x to ~$2.35 billion and consistently has generated above average FFO and dividend growth. Still, the Company's size is relatively small, so we suspect that a large deal pipeline supported by disciplined underwriting and a strong balance sheet continue to generate above average growth. NHI's conservative coverage with best-inclass operators also supports a premium equity valuation. 39

40 Healthcare REITs Overlap With Existing SNF/Senior Housing Coverage We initiated coverage on CCP, CTRE, HCN, and NHI. While many of these REITs are followed by REIT-dedicated analysts, we believe we can bring a unique perspective for the following reasons: We follow the operators. We currently cover senior housing operators Brookdale Senior Living (BKD) and Capital Senior Living (CSU), along with skilled nursing providers Genesis Healthcare (GEN) and The Ensign Group (ENSG). These companies are the tenants of the REITs and we believe there is value in understanding the operations that back the lease. BKD is a major tenant of HCN GEN is a major tenant of HCN ENSG spun-off its real-estate to CTRE Post-acute has been a major source of investor angst and confusion for REIT investors: In June, we published Post-Acute Care: A Review of Medicare Regulation and Payment Reform. With an alphabet soup of Medicare payment trials and proposed initiatives (ACOs, BPCI, CCJR, VBP, etc.), we wanted to outline these programs along with their impact on the post-acute providers. In short, we believe these issues are a net positive for home health (HHA) and a headwind for the remainder of PAC providers. Though, we believe market sentiment for HHA has become a bit too rosy, while the consensus view on SNFs has grown too negative. We believe this document provides a comprehensive review of the PAC landslide and the various reimbursement that could define the industry s future. We follow senior housing supply and demand dynamics, another source of investor concern for industry investors. Over recent years, additional focus has been put on the quarterly NIC data with particular emphasis on new construction. While we acknowledge this is an industry headwind, we also believe that increased demand has and will keep pace such that overall occupancy remains stable allowing for steady rate growth. See slide 35 for additional thoughts on senior housing demand/supply. 40

41 Risks EBITDAR Coverage Care Capital Properties (CCP) - $33 PT/OW 1 Large, fragmented SNF industry drives significant external growth opportunity. CCP is the second largest pure play SNF leasing company (2% share) behind Omega Healthcare Investors (OHI). Of the $122 billion marketplace of skilled nursing properties, only 16% are owned by publicly traded REITs. This will create opportunities for superior operators to take significant market share. It is imperative that SNFs provide quality outcomes in order to compete in a tightening industry. To do so, they will have to demonstrate the ability to invest in infrastructure to show value. These events should create meaningful consolidation and growth opportunities where the top 20 providers will account for only 20% of beds ,500 SNFs in the U.S OHI CCP HCP HCN SBRA LTC CTRE NHI VTR SNH 2 Focus on SNF Industry creates strategic advantage and drives cash flow growth through acquisitions of high yielding asset class. Demographic tailwinds exist as the senior population (65+) is expected to grow 80% between 2010 and 2030 and the 85+ segment is predicted to grow by over 60%. SNFs are among the higher yielding assets; we believe CCP acquisitions should generate 9% investment yields versus 6%-7% yields for private pay senior housing assets. 3 Diverse operator mix/geographies limits tenant risk and creates multiple avenues for future acquisitions with a management team experienced in REIT growth. With the balance sheet refinanced and the transition from Ventas largely complete, CCP can now focus on growing the portfolio. CEO Ray Lewis spent 13 years at Ventas, which saw gross investments grow from under $1 billion to nearly $19 billion. Diversification across geographic locations and operators has been and will continue to be a priority for Care Capital Properties. No operator accounts for more than 20% of revenue and only 1 state, Texas, is over 20%. EBITDAR coverage across the portfolio is a healthy 1.4x. 2.0x 1.5x 1.0x 0.5x 0.0x 1.3x Senior Care Centers 1.0x Signature HealthCARE 1.3x Avamere Family of Companies 1.7x Magnolia Health Systems 1.1x Wingate Healthcare 4 Valuation - $33 PT coupled with 7.7% dividend implies ~19% difference from current levels Dividend Rate: CCP currently trades at a 7.7% dividend rate. Over the last year, CCP has traded at an average dividend rate of 7.9%. Relative to the 10-year treasury, CCP currently trades at a 6.0% spread to the 10-year, in line with its one year average of 6.0%. If we assume a 7.2% dividend rate (5.5% spread to a 1.7% 10-year treasury), we arrive at a ~$32 share price. The peer group currently trades at a 5.5% dividend rate. Assuming a 20% discount to the peer group, we estimate a share price of ~$33. P/FFO: CCP currently trades at ~10x 2016 FFO vs. a historical average of 9.5x. The healthcare REIT comp group currently trades at 14.4x 2016 FFO. Assuming a 20% multiple discount to the peer group implies a share price of ~$ % 8.0% 6.0% 4.0% 2.0% 0.0% Dividend Rate 1-Year Average = 7.9% Risks SNF Reimbursement Pressures: If additional Medicare bundled payments are proposed or SNF rate updates are insufficient for operators to drive EBITDAR growth, then coverage for CCP tenants could come under pressure. This in turn could impede CCP s ability to raise rates. Inability to Close Acquisitions: If CCP is unable to close acquisitions, NOI growth is likely to slow, along with dividend growth. Inability to Access Attractive Financing: In order to fund M&A, CCP will likely need to access debt and equity markets. If CCP is unable to raise capital at attractive costs, then investment spreads will narrow and result in lower NOI growth. Inability to Renew Leases: CCP has ~20% of leases up for renewal in If CCP is not able to renew these leases at attractive rates or with preferred operators, NOI growth may suffer. Rising Interest Rates: Since dividend rate represents an important component of total return, REITs generally underperform the broader market during the initial stages of a rising interest rate cycle. 30.0% 20.0% 10.0% 0.0% Lease Expirations % of 2015 Rental Income Source: Stephens Inc., Company Filings 41

42 Risks Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 CareTrust REIT (CTRE) - $16 PT/OW 1 Large, Fragmented SNF Industry Drives Significant External Growth Opportunity. Of the $122 billion marketplace of skilled nursing properties, only 16% are owned by publicly traded REITs. This will create opportunities for superior operators to take significant market share. It is imperative that SNFs provide quality outcomes in order to compete in a tightening industry. To do so, they will have to demonstrate the ability to invest in infrastructure to show value. These events should create meaningful consolidation and growth opportunities where the top 20 providers will account for only 20% of beds. 1, Facilities Owned ,500 SNFs in the U.S OHI CCP HCP HCN SBRA LTC CTRE NHI VTR SNH Ample Liquidity, Small Relative Size Translate to Faster Growth We expect CareTrust to grow cash flow faster than its healthcare REIT peer group through an aggressive acquisition strategy at attractive cash yields supported by its improving financial position. Given the Company s relative small size, it is able to significantly increase growth by aggregating single facility, small portfolio deals that would not move the needle for larger cos. We expect 9%-10% SNF acquisition yields, 8%-9% SH acquisition yields. Increased credit facility by $100 million to $400 million with a $250 million accordion feature. The Company has also successfully raised ~$270 million in two separate equity offerings, which it quickly deployed into acquisitions. Further, CareTrust has one of the lowest dividend payout ratios, which provides more free cash for acquisitions as well as faster potential dividend growth as the ratio increases over time. We estimate that every $100 million of M&A generates ~2.4% of FFO growth. Diversifying Tenant Base De-risks Portfolio; Ensign Still Best-in-Class Ensign operates 94 CTRE properties, each of which is skilled nursing, and tenant coverage has grown from 1.85x at the time of the spin-off to 2.11x at the end of 2Q16. The relationship falls under eight master leases with staggered initial lease terms ranging from 12 to 19 years. CTRE has added Pristine & Trillium since the spin, which represent 18% and 5% of revenues, respectively. We view ENSG as best-in-class, but for purposes of diversification, CTRE would like to bring ENSG exposure down to <20% over time. Valuation - $16 Price Target Coupled With 4.5% Dividend Implies 12% Difference From Current Levels Dividend Rate: CTRE currently trades at a 4.6% dividend rate. Over the last two years, CTRE has traded at a 5.0% average dividend rate. CTRE s spread vs. the 10-year treasury has averaged 3.0%. Assuming a 72 cent dividend in 2017 and a 4.5% dividend rate, we arrive at a $16 stock. P/FFO: CTRE currently trades at 13.6x 2016 FFO versus a historical average of 13.6x. If we assume a 14x FFO multiple on our 2017 Normalized FFO/share estimate, we arrive at a ~$16 stock. The peer group currently trades at 14.0x 2016 FFO. M&A: We estimate that every $100 million of M&A generates ~2.4% of FFO growth. Then: 1 Operator 8.0% 6.0% 4.0% 2.0% 0.0% ENSG 100% Now: 15 Operators Every $100 million of M&A = ~2.4% of FFO/share Growth Premier Senior Living 4% Trillium Healthcare 5% Pristine/Liberty 18% Dividend Rate Average = 5.0% Other 17% Ensign 56% Risks ENSG Performance: Over 50% of revenues are derived from ENSG leases. ENSG had its struggles in 2Q16, which we view as temporary and fixable. CTRE has additional protection with 2x+ coverage. If ENSG does have significant operational issues, then CTRE could be disproportionately impacted. SNF Reimbursement Pressures: If additional Medicare bundled payments are proposed or SNF rate updates are insufficient for operators to drive EBITDAR growth, then coverage for CTRE tenants could come under pressure. This in turn could impede CTRE s ability to raise rates. Inability to Close Acquisitions: If CTRE is unable to close acquisitions, NOI growth is likely to slow, along with dividend growth. Inability to Access Attractive Financing: In order to fund M&A, CTRE will likely need to access debt and equity markets. If CTRE is unable to raise capital at attractive costs, then investment spreads will narrow and result in lower NOI growth. Rising Interest Rates: Since dividend rate represents an important component of total return, REITs generally underperform the broader market during the initial stages of a rising interest rate cycle Source: Stephens Inc., Company filings 42

43 Risks 1 Welltower (HCN) - $86 PT/OW Largely Private Pay Assets, Despite the Attention Post-Acute Receives While their skilled nursing assets often get a disproportionate amount of attention, the majority of HCN s NOI is derived from private pay senior housing and outpatient medical assets. Nearly 90% of NOI comes from private pay sources. 37%+ of NOI comes from their senior housing RIDEA assets, where they prefer the risk-reward of owning a stake in the operators along with the underlying real estate. 28% of NOI comes from the senior housing assets held in a triple-net structure, typically these assets are in secondary markets vs. the major metro areas in which their operating assets exist. HCN prefers to partner with health systems in the outpatient setting, which represents ~16% of NOI. Finally, their post-acute assets represent 20% of HCN s business. Importantly, these assets are in triple-net leases which add a layer of protection against the volatility of the underlying business and include annual escalators that contractually increase the rate on the lease. Medicare Medicaid 4% 5% Other 1% Private Pay 89% 2 Assets Focused in Major Metro Areas HCN has focused its recent acquisition spend on Class A real estate. This strategy has resulted in newer facilities, located in major metro areas. HCN has 8% market share in top-10 MSAs vs <4% in other markets. The large metros tend to be more transparent, more liquid, and deliver better results. SS growth in larger markets has been faster than smaller markets. U.S.: The majority of our discussion and the majority of HCN assets are located in the U.S. U.S. assets represent 85% of NOI. Within the U.S., New York City represents the largest portion of NOI, followed by Philadelphia, and Los Angeles. UK: When Welltower talks about its UK assets, it is really speaking about the greater London area. London is a good example of the Welltower strategy of owning private pay assets in affluent markets. London s housing values are nearly 57% higher than the rest of the country. Canada: Welltower s Canadian assets are generally independent living assets, which generally have more stable operating results, but also means lower growth (2%-3%) relative to the rest of the senior housing portfolio. MSA % NOI New York 7.1% Philadelphia 5.4% Greater London 4.6% Los Angeles 4.6% Boston 3.6% 3 4 Strong Partnerships With Quality Operators Drive Growth, Additional Investments Strategy: HCN is focused on partnering with quality operators. HCN enters into these new relationships with a long-term focus. The goal is to grow these relationships over time such that the follow-on deals end up much larger than the initial investment. Shared Knowledge: HCN has access to the operating statistics across its various operator-partners. For example, HCN has an expense benchmarking tool for its senior housing operators, with data from 700 providers. HCN has also worked with operators on ways to optimize labor costs and holds regular executive forums, where operators can discuss pressing issues and best practices. Annual Investments With Partners: In 2015, 97% of new investments were sourced from existing partners. This has varied over the years, though its proportion has increased over time. It was <50% in 2010 and 2011, but since then it has been >50%, including nearly 100% of if 2015 investments. Going forward, we would expect >50% of annual investments to come from existing partners, especially as the panel of operators has increased over recent years. YTD 2016, 100% of HCN s deals were sourced from existing partners. Valuation - $86 Price Target With 4.3% Dividend Implies ~20% Difference From Current Levels. Dividend Rate: HCN currently trades at a 4.7% dividend rate. HCN has traded at a 4.8% average rate over the last three years and 7.2% over the last twenty years. HCN s spread vs. the 10-year treasury has averaged 2.6% over the past three years and 3.2% over the past twenty years. As the cost of capital moves lower and the GEN assets are disposed of, we expect HCN to trade at a lower dividend rate. We believe a 4.0% dividend rate is fair in the current environment where the 10-year treasury is ~1.7%. Assuming a $3.44/share dividend in 2016 and a 4.0% dividend rate, we arrive at an ~$86/stock. P/FFO: HCN trades at 16.1x FFO versus a 15.9x average over the last three years. Using an 18x multiple on our 2017 FFO estimate, we arrive at an ~$85 valuation. Risks SNF Reimbursement Pressures: If additional Medicare bundled payments are proposed or SNF rate updates are insufficient for operators to drive EBITDAR growth, then coverage for GEN could come under pressure. This in turn could impede HCN s ability to sell the GEN assets. SHOP Exposure increases volatility: We like HCN s SHOP segment as it gives HCN flexibility in adding quality senior housing operators to their platform. It does, however, add risk as HCN is exposed to the underlying occupancy at the respective properties. Operator Relationships: Should any of HCN s operators have operational issues, then coverage could become constrained and eventually impact HCN rental income. Inability to Close Acquisitions: If HCN is unable to close acquisitions, NOI growth is likely to slow, along with dividend growth. Inability to Access Attractive Financing: In order to fund M&A, HCN will likely need to access debt and equity markets. If HCN is unable to raise capital at attractive costs, then investment spreads will narrow and result in lower NOI growth. Rising Interest Rates: Since dividend rate represents an important component of total return, REITs generally underperform the broader market during the initial stages of a rising interest rate cycle. Source: Stephens Inc., Company filings 43

44 Risks 1 National Health Investors (NHI) - $84 PT/OW Best-in-Class Operators Foster Healthy Coverage, External Growth. NHI is relatively concentrated with five operators generating ~69% of annualized rental revenue. While we generally like to see a more diversified operator base, we view these companies as best-in-class operators within their respective industries with healthy coverage ratios and a demonstrated ability to growing with their capital partners. Despite the concentration within the top five, NHI maintains ongoing relationships with 31 operating partners which also foster healthy coverage and should create ample external growth opportunities. NHI seeks to partner with smaller regional operators who are often over looked by larger REITs. We believe that NHI takes a more hands on approach to cultivating these relationships given the relatively small organizational structure that provides more direct access to the C-suite decision makers. Publicly traded % of revenues National Healthcare Corporation (NHC) 16% Ensign Group (ENSG) 9% Brookdale Senior Living (BKD) 2% Community Health Systems (CYH) 2% Private % of revenues Holiday 15% Bickford 15% SLC 14% East Lake 4% Sound Balance Sheet, Prudent Capital Deployment Generate Leading Growth Profile Since 2009, NHI has increased its gross asset value by nearly 10.5x from $224 million to ~$2.35 billion all while maintaining a healthy balance sheet. The spend has been lumpy, which we think is testament to the Company s stringent underwriting standards. NHI owns 459,140 million shares in LTC properties, after selling 834,600 YTD and another 1 million in 4Q15. NHI purchased 2 million shares of LTC preferred stock in 1998, which it converted to common in November It currently has a rate of ~5%. This has obviously been a good source of proceeds to fuel external growth without having to raise additional equity or add debt. Diversified Portfolio Creates Multiple Growth Avenues NHI has a diversified portfolio of properties, largely under triple-net leases. Skilled nursing facilities represent the largest component of revenues with an average Star rating of 3.7, we believe NHI s SNF operators are well-positioned for the transition to valued based payments. The senior housing assets under triple-net leases are weighted towards IL facilities, which helps diversify the portfolio and faces less competition from new supply. NHI s RIDEA JV with Bickford (Private) will be transitioned to a triple-net structure by the end of NHI groups its facilities into three general types of properties: Needs driven medical properties (hospitals, SNFs) where the main risk is reimbursement, Needs driven senior housing (assisted living, MC) where the main risk is new supply, Discretionary senior housing (IL, CCRC) where the main risk is the housing market, which during downturn pressured the segment Valuation - $84 Price Target With 4.5% Dividend Implies ~13% Difference From Current Levels. Dividend Rate: NHI currently trades at a 4.7% dividend rate. NHI has traded at a 6.2% average rate over the last 10 years and 4.9% over the last three years. NHI s spread vs. the 10- year treasury has averaged 3.3% over the last ten years and 2.6% over the past three years. We believe a 4.5% dividend rate is fair in the current environment where the 10-year treasury is ~1.7%. Assuming a $3.80/share dividend in 2017 and a 4.5% rate, we arrive at a ~$84/stock. P/FFO: NHI currently trades at 15.9x FFO versus a historical average of 14.9x. This is a 10% premium to the broader HC REIT space, versus trading at a parity historically. We believe consistent above average FFO growth, a diversified asset base, best-in-class operators, and a prudent balance sheet warrant a valuation at the high end of the peer group of 17x-18x. This implies a share price of $85-$90 share. 6.0x 4.0x 2.0x 0.0x 2.0x 3.4x 4.2x 4.2x 4.4x Net Debt to Adjusted EBITDA Notes RIDEA 6% 14% Lease 79% REIT Dividends 1% Risks Operator Relationships: NHI has five key operators who each represent 9%+ of cash revenues. Should any of these operators have operational issues, then coverage could become constrained and eventually impact NHI s rental income. Senior Housing New Supply: If the new construction of senior living properties leads to an oversupply, NHI s operators may become financially constrained, leading to lower coverage on NHI leases. SNF Reimbursement Pressures: If additional Medicare bundled payments are proposed or SNF rate updates are insufficient for operators to drive EBITDAR growth, then coverage for NHI tenants could come under pressure. This in turn could impede NHI s ability to raise rates. Inability to Close Acquisitions: If NHI is unable to close acquisitions, NOI growth is likely to slow, along with dividend growth. Inability to Access Attractive Financing: In order to fund M&A, NHI will likely need to access debt and equity markets. If NHI is unable to raise capital at attractive costs, then investment spreads will narrow and result in lower NOI growth. Rising Interest Rates: Since dividend rate represents an important component of total return, REITs generally underperform the broader market during the initial stages of a rising interest rate cycle % 80.0% 60.0% 40.0% 20.0% 0.0% 0.9% 4.7% 0.6% 0.0% 1.5% 1.0% 2.2% 1.7% 2.2% 5.3% % of cash rent 79.9% Source: Stephens Inc., Company filings 44

45 U.S. Health Expenditures $6,000 National Health Expenditures ($B) 7.0% $5,000 $4,000 $3,000 $2,000 $1, % 5.0% 4.0% 3.0% 2.0% 1.0% $0 0.0% National Health Expenditures Growth Source: Centers for Medicare & Medicaid Services, Office of the Actuary. 45

46 U.S. Insured Population (Thousands) % % Any Health Plan 271, % 283, % Any Private Plan 201, % 208, % Employment-based 174, % 175, % Direct Purchase 35, % 46, % Any Government Plan 108, % 115, % Medicare 49, % 50, % Medicaid 54, % 51, % Military 14, % 14, % Uninsured 41, % 32, % 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% Any Health Plan Percentage Change Any Private Plan Employment -based Direct Purchase Any Government Plan Medicare Medicaid Military Uninsured % Change % 1.8% -0.3% 3.2% 2.0% 0.3% -1.2% 0.0% -2.9% Source: U.S. Census Bureau, Current Population Survey, 2014 and 2015 Annual Social and Economic Supplements. 46

47 U.S. Personal Health Care Expenditures by Provider (2012) Other health insurance programs, 4% Out of Pocket, 14% Medicare, 23% Private Health Insurance, 34% Medicaid, 16% Other 3rd Party Payers, 9% Source: Medpac. CMS Office of the Actuary, National Health Expenditure Accounts, Table 6 Personal Health Care Expenditures; Levels, Percent Change and Percent Distribution, by Source of Funds: Selected Calendar Years , released January