Forward-looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words "believes," "anticipates," "intends," "expects," "assumes," "trends" and similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company's current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following:

• general economic and business conditions;

• demographic changes;

• changes in, or failure to comply with, existing governmental regulations;

• legislative proposals for healthcare reform;

• changes in Medicare and Medicaid reimbursement levels;

• effects of competition in the markets in which the Company operates;

• liability and other claims asserted against the Company;

• ability to attract and retain qualified personnel;

• ability to access capital markets;

• availability and terms of capital;

• loss of significant contracts or reduction in revenues associated with major payer sources;

• ability of customers to pay for services;

• business disruption due to natural disasters, pandemic outbreaks or terrorist acts;

• ability to successfully integrate the operations of acquisitions the Company may make and achieve expected synergies and operational efficiencies within expected time-frames;

• effect on liquidity of the Company's debt service requirements; and

• changes in estimates and judgments associated with critical accounting policies and estimates.

Forward-looking statements are found throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q. The reader should not place undue reliance on forward-looking

statements, which speak only as of the date of this report. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission ("SEC"), the Company does not have any intention or obligation to publicly release any revisions to forward-looking statements to reflect unforeseen or other events after the date of this report. The Company has provided a detailed discussion of risk factors in its Annual Report on Form 10-K for the fiscal year ended December 28, 2008 and various filings with the SEC. The reader is encouraged to review these risk factors and filings.

General

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of Gentiva's results of operations and financial position. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements and related notes included elsewhere in this report.

The Company's results of operations are impacted by various regulations and other matters that are implemented from time to time in its industry, some of which are described in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2008 and in other filings with the SEC.

Overview

Gentiva Health Services, Inc. is a leading provider of comprehensive home health services. Gentiva serves patients through more than 380 locations located in 39 states.

The Company provides a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; respiratory therapy and HME; infusion therapy services; and other therapies and services. Gentiva's revenues are generated from federal and state government programs, commercial insurance and individual consumers.

Until September 25, 2008, the Company operated CareCentrix, which provided an array of administrative services and coordinated the delivery of home nursing services, acute and chronic infusion therapies, home medical equipment ("HME"), respiratory products, orthotics and prosthetics, and services for managed care organizations and health plans. Effective September 25, 2008, the Company completed the disposition of 69 percent of its equity ownership interest in the Company's CareCentrix ancillary care benefit management business.

The federal and state government programs are subject to legislative and other risk factors that can make it difficult to determine future reimbursement rates for Gentiva's home health services to patients. For example, Congress currently has under discussion a number of healthcare reform measures, some of which include reimbursement changes to home health and hospice that can, if enacted, negatively impact Gentiva and other providers. The legislative environment is presently very fluid, and the Company is monitoring the situation closely.

The commercial insurance industry is continually seeking ways to control the cost of services to patients that it covers. One of the ways it seeks to control costs is to require greater efficiencies from its providers, including home healthcare companies. Various states have addressed budget pressures by considering or implementing reductions in various healthcare programs, including reductions in rates or changes in patient eligibility requirements. The Company has also decided to reduce participation in certain Medicaid and other state and county programs.

Gentiva believes that several marketplace factors can contribute to its future growth. First, the Company is a leader in a highly fragmented home healthcare industry populated by approximately 13,500 providers of varying size and resources. Second, the cost of a home healthcare visit to a patient can be significantly lower than the cost of an average day in a hospital or skilled nursing institution. And third, the demand for home care is expected to grow, primarily due to an aging U.S. population. The Company expects to capitalize on these factors through a determined set of strategies, as follows: growing revenues from services provided to the geriatric population, with a particular emphasis on expanding the penetration of the Company's innovative specialty programs; focusing on clinical associate recruitment, retention and productivity; continuing technology initiatives that can make Gentiva more efficient and profitable; evaluating and closing opportunistic acquisitions; and further strengthening the Company's balance sheet to support future growth. The Company anticipates executing these strategies by continuing to expand its sales presence, developing and marketing its managed care services, making operational improvements and deploying new technologies, providing employees with leadership training and instituting retention initiatives, ensuring strong ethics and corporate governance, and focusing on shareholder value.

Management intends the discussion of the Company's financial condition and results of operations that follows to provide information that will assist in understanding its financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect the Company's financial statements.

The Company's operations involve servicing patients and customers through
(i) its Home Health business segment, (ii) various smaller operating segments, including hospice, respiratory services and HME, infusion therapy services and consulting, which are classified in the aggregate as "All Other" for segment reporting purposes, and (iii) for periods prior to September 25, 2008, its CareCentrix business segment.

Home Health

The Home Health segment is comprised of direct home nursing and therapy services operations, including specialty programs, and its Rehab Without Walls ® unit. The Company conducts direct home nursing and therapy services operations through licensed and Medicare-certified agencies, located in 39 states, from which the Company provides various combinations of skilled nursing and therapy services, paraprofessional nursing services and, to a lesser extent, homemaker services generally to adult and elder patients. The Company's direct home nursing and therapy services operations also deliver services to its customers through focused specialty programs that include:

• Gentiva Orthopedics, which provides individualized home orthopedic rehabilitation services to patients recovering from joint replacement or other major orthopedic surgery;

• Gentiva Safe Strides ® , which provides therapies for patients with balance issues who are prone to injury or immobility as a result of falling;

• Gentiva Cardiopulmonary, which helps patients and their physicians manage heart and lung health in a home-based environment;

• Gentiva Neurorehabilitation, which helps patients who have experienced a neurological injury or condition by removing the obstacles to healing in the patient's home; and

• Gentiva Senior Health, which addresses the needs of patients with age-related diseases and issues to effectively and safely stay in their homes.

Through its Rehab Without Walls ® unit, the Company also provides home and community-based neurorehabilitation therapies for patients with traumatic brain injury, cerebrovascular accident injury and acquired brain injury, as well as a number of other complex rehabilitation cases.

CareCentrix

The CareCentrix segment encompassed Gentiva's ancillary care benefit management and the coordination of integrated homecare services for managed care organizations and health benefit plans. CareCentrix operations provided an array of administrative services and coordinated the delivery of home nursing services, acute and chronic infusion therapies, HME, respiratory products, orthotics and prosthetics, and services for managed care organizations and health benefit plans. CareCentrix accepted case referrals from a wide variety of sources, verified eligibility and benefits and transferred case requirements to the providers for services to the patient. CareCentrix provided services to its customers, including the fulfillment of case requirements, care management, provider credentialing, eligibility and benefits verification, data reporting and analysis, and coordinated centralized billing for all authorized services provided to the customers' enrollees.

All Other

Hospice

Hospice serves terminally ill patients in the southeast United States. Comprehensive management of the healthcare services and products needed by hospice patients and their families are provided through the use of an interdisciplinary team. Depending on a patient's needs, each hospice patient is assigned an interdisciplinary team comprised of a physician, nurse(s), home health aide(s), medical social worker(s), chaplain, dietary counselor and bereavement coordinator, as well as other care professionals.

Respiratory Therapy and Home Medical Equipment

Respiratory therapy and HME services are provided to patients at home through branch locations primarily in the southeast United States. Patients are offered a broad portfolio of products and services that serve as an adjunct to traditional home health nursing and hospice care. Respiratory therapy services are provided to patients who suffer from a variety of conditions including asthma, chronic obstructive pulmonary diseases, cystic fibrosis and other respiratory conditions. HME includes hospital beds, wheelchairs, ambulatory aids, bathroom aids, patient lifts and rehabilitation equipment.

Infusion Therapy

Infusion therapy is provided to patients at home through pharmacy locations in the southeast United States. Infusion therapy serves as a complement to the Company's traditional service offerings, providing clients with a comprehensive home health provider while diversifying the Company's revenue base. Services provided include: (i) enteral nutrition, (ii) antibiotic therapy, (iii) total parenteral nutrition, (iv) pain management, (v) chemotherapy, (vi) patient education and training and (vii) nutrition management.

Consulting

The Company provides consulting services to home health agencies through its Gentiva Consulting unit. These services include billing and collection activities, on-site agency support and consulting, operational support and individualized strategies for reduction of days sales outstanding.

Significant Developments

Dispositions

Pediatric and Adult Hourly Services Dispositions

During the first quarter of 2009, the Company sold assets associated primarily with certain branch offices that specialized primarily in pediatric home health care services for total consideration of $6.5 million. The sales related to seven offices in five cities and included the adult home care services in the affected offices. Annual revenues generated from the assets that were sold approximated $24 million for the twelve months prior to the sales' effective dates. The Company received $5.9 million in cash at the close of the sale and $0.6 million as the final payment in September 2009. The sales, after deducting related costs, resulted in a net gain before income taxes of $5.7 million. This gain is included in the gain on sale of assets, net in the Company's consolidated statement of income and consolidated statement of cash flows for the nine months ended September 27, 2009.

CareCentrix Disposition

Effective September 25, 2008, the Company completed the disposition of 69 percent of its equity ownership interest in the Company's CareCentrix ancillary care benefit management business for total consideration of approximately $135 million.

The Company's consolidated statements of income for the third quarter and nine months ended September 28, 2008 presented herein include the results of CareCentrix operations, including net revenues of $75.6 million and $232.7 million, respectively. The Company's consolidated statements of income for the third quarter and nine months ended September 27, 2009 presented herein include the Company's equity in the net earnings of CareCentrix Holdings Inc., a holding company which owns CareCentrix.

Acquisitions

The Company has closed several acquisitions since early 2008. In comparing results of operations between the 2008 and 2009 reporting periods, incremental net revenues relating to acquired businesses approximated $2.1 million and $16.7 million for the third quarter and first nine months of 2009, respectively.

For the first nine months of 2009, total cash consideration paid for acquired businesses amounted to $10.3 million, excluding transaction costs and subject to post-closing adjustments. The acquisitions completed during the 2009 period extended the Company's operations primarily into geographic areas not previously serviced by the Company within states requiring a Certificate of Need ("CON") to perform home health services. The name of the acquired home health agency, the acquisition date and the geographic service area is summarized below:

Name of Agency                Acquisition Date    Geographic Service Area
Mid-State Home Health
Agency                        June 20, 2009       Central Louisiana
Nicholas County Home
Health Agency                 July 1, 2009        West Virginia
Magna Home Health             August 22, 2009     Central Mississippi /Western Alabama

For the first nine months of 2008, total cash consideration paid for acquired businesses amounted to $60.6 million. These acquisitions are further described below:

Home Health Care Affiliates, Inc.

Effective February 29, 2008, the Company completed the acquisition of Home Health Care Affiliates, Inc. ("HHCA"), a provider of home health and hospice services in the state of Mississippi.

Physicians Home Health Care

Effective June 1, 2008, the Company completed the acquisition of CSMMI, Inc., d/b/a Physicians Home Health Care ("PHHC"), a provider of home health services with three locations in Colorado, pursuant to an asset purchase agreement.

Hospice of Charleston

On August 2, 2008, the Company acquired certain assets of Hospice of Charleston, a non-profit homecare company that provided hospice services, as well as home health services, for approximately $1.2 million, which was funded from the Company's existing cash reserves. The acquisition allowed the Company to expand its home health services to three CON counties in and around Charleston, South Carolina.

The impact of these transactions has been reflected in the Company's results of operations and financial condition from their respective closing dates. See Note 4.

Results of Operations

The historical results that follow present a discussion of the Company's consolidated operating results using the historical results of Gentiva prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for the periods presented.

Revenues

A summary of the Company's net revenues by segment follows:



                                                                       Third Quarter                             First Nine Months
                                                                                      Percentage                                   Percentage
(Dollars in millions)                                        2009         2008         Variance         2009          2008          Variance
Home Health                                                 $ 261.4      $ 239.3             9.2 %     $ 784.8      $   693.2            13.2 %
CareCentrix                                                      -          75.6              -             -           232.7              -
All Other                                                      34.6         31.2            10.6          99.1           87.8            12.9
Intersegment revenues                                          (0.4 )       (0.9 )         (52.4 )        (1.3 )         (2.6 )         (51.4 )

Total net revenues                                          $ 295.6      $ 345.2           (14.4 %)    $ 882.6      $ 1,011.1           (12.7 %)


A summary of the Company's net revenues by payer follows:

                                                                       Third Quarter                             First Nine Months
                                                                                      Percentage                                   Percentage
(Dollars in millions)                                        2009         2008         Variance         2009          2008          Variance
Medicare
Home Health                                                 $ 190.0      $ 165.2            15.0 %     $ 570.2      $   471.5            20.9 %
All Other                                                      21.8         19.4            12.5          62.8           52.9            18.9

Total Medicare                                                211.8        184.6            14.8         633.0          524.4            20.7
Medicaid and Local Government                                  23.7         32.4           (26.9 )        76.7           97.0           (20.9 )
Commercial Insurance and Other:
Paid at episodic rates                                         20.7         14.1            46.6          55.9           38.7            44.8
Other                                                          39.4        114.1           (65.5 )       117.0          351.0           (66.7 )

Total Commercial Insurance and Other                           60.1        128.2           (53.2 )       172.9          389.7           (55.6 )

Total net revenues                                          $ 295.6      $ 345.2           (14.4 %)    $ 882.6      $ 1,011.1           (12.7 %)

Net revenues decreased by $49.6 million or 14.4 percent for the third quarter of 2009 as compared to the third quarter of 2008. Excluding prior year's third quarter revenues from the Company's CareCentrix business unit and the related adjustment to intersegment revenues, net revenues increased approximately $25.3 million or 9.4 percent in the third quarter of 2009.

Net revenues decreased by $128.5 million or 12.7 percent for the first nine months of 2009 as compared to the first nine months of 2009. Excluding prior year's first nine months revenues from the Company's CareCentrix business unit and the related adjustment to intersegment revenues, net revenues increased approximately $102.6 million or 13.1 percent in the first nine months of 2009.

Home Health

Home Health segment revenues are derived from all three payer groups: Medicare, Medicaid and Local Government and Commercial Insurance and Other. Third quarter 2009 net revenues were $261.4 million, up $22.1 million, or 9 percent, from $239.3 million in the prior year period. For the first nine months of fiscal 2009, net revenues were $784.8 million, a $91.6 million or 13 percent increase compared to $693.2 million for the corresponding period of fiscal 2008.

The Company's episodic revenues grew at 17.5 percent and 22.7 percent for the third quarter and first nine months of 2009, respectively. A summary of the Company's combined Medicare and non-Medicare Prospective Payment System ("PPS") business paid at episodic rates follows:

                                                 Third Quarter                          First Nine Months
                                                               Percentage                               Percentage
(Dollars in millions)                   2009         2008       Variance         2009         2008       Variance
Medicare                              $   190.0   $    165.2         15.0 %    $   570.2   $    471.5         20.9 %
Paid at episodic rates                     20.7         14.1         46.6           55.9         38.7         44.8

Total                                 $   210.7   $    179.3         17.5 %    $   626.1   $    510.2         22.7 %

Key Company statistics related to episodic revenues were as follows:

                               Third Quarter                        First Nine Months
                                            Percentage                              Percentage
                        2009       2008      Variance         2009        2008       Variance
Episodes                66,700     61,600          8.3 %      200,400     182,500          9.8 %
Revenue per episode   $  3,160   $  2,910          8.6 %    $   3,120   $   2,790         11.8 %

Factors contributing to the improvements in revenue per episode for the third quarter of 2009 include growth in the Company's therapy-based specialty programs that have a higher level of reimbursement, and a shift in mix toward higher acuity cases. Episodic revenue growth, excluding the impact of recent acquisitions, was approximately 17 percent for the third quarter of 2009 and 21 percent in the first nine months of 2009.

In the third quarter and first nine months of 2009, Medicare and non-Medicare PPS revenues as a percent of total Home Health revenues were 81 percent and 80 percent, respectively, as compared to 75 percent and 74 percent, respectively, for the corresponding periods in 2008. In the third quarter and first nine months of 2009, revenues from specialty programs as a percent of total Medicare Home Health revenues were 38 percent and 37 percent, respectively, as compared to 32 percent and 30 percent, respectively, for the corresponding periods of 2008.

Revenues from Medicaid and Local Government payer sources were $21.3 million and $69.9 million in the third quarter and first nine months of 2009, respectively, as compared to $30.6 million and $91.0 million in the third quarter and first nine months of 2008, respectively. Revenues from Commercial Insurance and Other payer sources, excluding non-Medicare PPS revenues, were $29.4 million in the third quarter of 2009 as compared to $29.4 million in the third quarter of 2008. For the first nine months of 2009 as compared to the corresponding period of 2008, revenues from Commercial Insurance and Other payer sources were $88.8 million and $92.0 million, respectively.

The disposition in the first quarter of the majority of the Company's assets associated primarily with certain branch offices that specialized primarily in pediatric home health care services, as well as certain other contracts, contributed to the decreases in Medicaid and Local Government revenues of $4.5 million and $10.3 million, respectively, for the third quarter and first nine months of fiscal 2009 and in Commercial Insurance and Other revenues by $1.5 million and $3.6 million, respectively, for the third quarter and first nine months of fiscal 2009. Additional decreases in the Medicaid and Local Government and Commercial Insurance and Other payer sources resulted primarily from the Company's ongoing strategy to reduce or eliminate certain lower gross margin business as the Company continues to pursue more favorable commercial pricing and a higher mix of Medicare and non-Medicare PPS business.

CareCentrix

CareCentrix segment revenues were derived from the Commercial Insurance and Other payer group only. Third quarter 2008 net revenues were $75.6 million. For the first nine months of fiscal 2008, net revenues were $232.7 million.

All Other

All Other revenues are derived from all three payer groups. Third quarter and first nine months of fiscal 2009 net revenues were $34.6 million and $99.1 million, respectively, as compared to $31.2 million and $87.8 million, respectively, in the corresponding periods of 2008. The increase for the third quarter of 2009 was attributable primarily to a $2.2 million increase in hospice revenues, of which approximately $0.6 million related to revenues from acquisitions completed during 2008, and a $1.1 million increase in respiratory therapy services and HME and infusion therapy revenues. The increase for the first nine months of 2009 was attributable primarily to a $9.8 million increase in hospice revenues, of which approximately $4.4 million related to revenues from acquisitions completed during 2008, and a $1.6 million increase in respiratory therapy services and HME revenues, offset somewhat by declines in other segment component revenues as compared to the corresponding period of 2008.

In All Other, Medicare revenues were $21.8 million and $62.8 million, respectively, in the third quarter and first nine months of 2009 as compared to . . .