(Adds Gentiva's response)

July 21 (Reuters) - Kindred Healthcare Inc said it is prepared to buy Gentiva Health Services Inc for $17.25 per share, matching an offer by an unnamed party last week.

Gentiva shares were marginally up at $18 after markets closed on Monday.

Kindred could make a raised offer if it was permitted to conduct diligence, the hospital operator said in a letter to Gentiva's board on Monday.

It was also willing to enter into "appropriate confidentiality and standstill agreements."

Gentiva said it would review Kindred's conditional proposal carefully in due course.

Gentiva last week rejected Kindred's offer to buy a stake in the home healthcare services provider. The company also said it had received a $634.2 million buyout offer from an unnamed party.

Kindred earlier bid $16 per share for a 14.9 percent stake, which would make it the largest single Gentiva shareholder.

U.S. hospitals and home healthcare service providers have been hit hard by federal budget spending cuts and lower Medicare insurance reimbursement rates.

Kindred shares closed at $24.19 on the New York Stock Exchange.

(Reporting by Shailesh Kuber in Bangalore; Editing by Don Sebastian and Joyjeet Das)